Hailey Johnson
A 90% loan-to-value (LTV) mortgage is a loan where a borrower takes out a mortgage for 90% of a property's value, putting down a 10% deposit. Lenders consider these loans high-risk, so they demand relatively high-interest rates. However, 90% LTV mortgages are a good option for those who cannot save for a large deposit but want to become homeowners. Several mortgage lenders offer 90% mortgages, including high street lenders and specialist providers for first-time buyers or specific professions.
| Characteristics | Values |
|---|---|
| Type of Mortgage | 90% LTV Mortgage (Loan-to-Value) |
| Who is it for? | Those who can't save up for a big deposit but want to become homeowners |
| Who offers it? | AAA LENDINGS, Mojo Mortgages, Tembo, Mortgage Genie, and other high street lenders and specialist mortgage providers |
| Interest Rates | Higher compared to lower LTV mortgages |
| Risk | High-risk for lenders |
| Eligibility | Depends on the lender; usually involves affordability and credit score checks |
| First-time Buyers | Yes, as long as they meet the lender's eligibility criteria |
| Other Costs | Stamp duty, solicitor's fees, mortgage arrangement fees, home ownership costs, and living expenses |
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What You'll Learn
Who are the lenders offering 90% LTV mortgages?
A 90% loan-to-value (LTV) mortgage is a home loan where you borrow 90% of the property's value from a lender. This is also referred to as a 10% deposit mortgage, as the remaining 10% of the property value is covered by your deposit. Lenders consider these loans as high-risk and consequently demand relatively higher interest rates.
Several lenders offer 90% LTV mortgages, including:
- United Wholesale Mortgage (UWM)
- AAA LENDINGS
- Mojo Mortgages
Lenders will evaluate your eligibility by running checks on your personal and financial profile, including a credit check. They will also consider your income, as it's a general rule that lenders offer up to 4x one's annual income.
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What are the pros and cons of 90% LTV mortgages?
A 90% loan-to-value (LTV) mortgage is any home loan where you borrow 90% of the property's value from a lender. This is also referred to as a 10% deposit mortgage, as the remaining 10% of the property value is paid for using your deposit. The higher the ratio between what you borrow and the value of the home, the greater the risk for lenders. This means that a 90% mortgage will typically have higher interest rates compared to lower LTV mortgage deals.
Pros
- You can secure a property with a 10% deposit, which is perfect for those who can't save up for a big deposit but want to become a homeowner.
- The fact that you've saved for a 10% deposit signals a degree of financial stability and money-handling capabilities, so your application won't need to be backed up by a guarantor.
- Lenders may be more accommodating when considering applications with lower LTV ratios, so you may find that the credit score requirements are less stringent.
- Lender-gifted deposits are an option, where lenders contribute towards the required deposit amount, easing the financial burden on borrowers.
Cons
- 90% mortgages are considered high-risk, and consequently, you'll likely pay higher interest rates compared to lower LTV mortgages.
- There's a possibility that if property prices fall, you could end up owing more than the property is worth (negative equity).
- A 90% LTV mortgage may make it harder to remortgage, as you'll typically only have access to a limited range of remortgage deals if you have a small proportion of equity in your home.
- The bigger the deposit you can save, the wider the range of mortgage options available to you, and lenders typically reserve their most competitive rates for those with larger deposits.
Remember, the right mortgage option for you depends entirely on your personal and financial circumstances. It's important to carefully consider your situation and seek expert advice when making such important financial decisions.
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How does a 90% LTV mortgage compare to other mortgages?
A 90% LTV mortgage is a home loan where you borrow 90% of the property's value from a lender. The remaining 10% is paid for using your deposit. This type of mortgage is popular among first-time buyers as it is relatively accessible and only requires a 10% deposit, which is easier to save for compared to lower LTV alternatives.
When comparing a 90% LTV mortgage to other mortgages, it is important to consider the interest rates and overall cost. A 90% LTV mortgage is considered a high-risk investment for lenders, which means that they demand relatively higher interest rates compared to lower LTV mortgages. The higher interest rates can add thousands of pounds extra over the lifetime of the mortgage. Therefore, a 90% LTV mortgage is generally more expensive than a lower LTV mortgage, such as an 80% LTV mortgage.
However, a 90% LTV mortgage is usually cheaper than a 95% LTV mortgage, as the more you are able to put down as a deposit, the lower your rate normally is. A 90% LTV mortgage also provides a wider range of products available from a greater number of lenders compared to a 95% LTV mortgage. Additionally, with a 90% LTV mortgage, you are less likely to go into negative equity compared to a 95% deal, where the mortgage is more than the value of the property.
It is worth noting that there are other LTV deals offered by lenders, such as 100% (no deposit) mortgages, although these are rare and usually require a guarantor. Ultimately, the right mortgage route depends on your personal and financial circumstances, and it is important to weigh the pros and cons of each option.
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What are the eligibility criteria for a 90% LTV mortgage?
A 90% LTV mortgage is a loan-to-value mortgage where you borrow 90% of the property's value from a lender. This is also referred to as a 10% deposit mortgage, as the remaining 10% of the property value is paid for using your deposit.
Lenders will evaluate you by running checks on your personal and financial profile. This assessment will include a credit check to see if you have any credit debt or have failed to meet past payday loans. They will also look at your history to see if you have previously encountered a court county judgement (CCJ), an IVA, or bankruptcy. If you have any of these on your record, they will negatively affect your eligibility for a mortgage. However, if you handled these situations more than six years ago, they may not affect your application, although some lenders might still reject you.
Lenders will also look at your income to calculate whether or not you can afford to repay your mortgage. If you've recently been furloughed or lost your income, you may find it challenging to meet eligibility criteria. It's important to note that 90% LTV mortgages are considered high-risk, and consequently, you will have to pay relatively higher interest rates compared to lower LTV mortgages.
While it is challenging to secure a 90% LTV mortgage with bad credit, it is possible to apply for a bad credit mortgage. However, higher interest rates and stricter terms may apply.
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What are the costs involved with a 90% LTV mortgage?
A 90% loan-to-value (LTV) mortgage is a home loan where you borrow 90% of the property's value from a lender. This is also referred to as a 10% deposit mortgage, as the remaining 10% of the property value is paid using a deposit. The higher the ratio between the loan and the property value, the greater the risk for lenders. This means that a 90% mortgage will typically have higher interest rates compared to lower LTV mortgage deals.
When taking out a 90% LTV mortgage, there are several costs to be aware of. These include:
Typical costs of buying a property
- Stamp duty
- Solicitor's fees
- Mortgage arrangement fees
Home ownership costs
Unexpected repairs
It is recommended to keep some savings aside as an emergency fund and to cover living expenses. It is wise to keep three to six months' worth of everyday household bills and mortgage payments in an emergency savings account in case of a sudden change in circumstances.
Interest rates
Due to the higher risk involved with 90% LTV mortgages, lenders will typically charge higher interest rates compared to lower LTV mortgage deals. This could add thousands of pounds extra over the lifetime of the mortgage.
Remortgaging
Many people choose to remortgage onto another deal at the end of their introductory deal, so they won't end up paying the standard variable rate (SVR). When remortgaging, you can choose between a fixed-rate mortgage or a variable-rate deal such as a tracker mortgage. A fixed-rate mortgage is generally favoured when interest rates are low, as it provides security on how much your monthly repayments will cost. A variable-rate deal may be preferable if you believe interest rates will decrease, as the rates are dictated by the Bank of England's base rate and can change each month.
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Frequently asked questions
Yes, several banks and specialist lenders offer 90% LTV mortgages. These include Mojo Mortgages, Tembo, AAA LENDINGS, and more.
To qualify for a 90% LTV mortgage, you typically need to meet the lender's eligibility criteria, pass affordability and credit score checks, and have a deposit worth 10% of the property's value. Lenders will evaluate your personal and financial profile, including your credit history, debt, and income.
A 90% LTV mortgage can be a good option if you are struggling to save for a large deposit or want to purchase a more expensive property. It may signal financial stability and money-handling capabilities, and your application may not need a guarantor. However, 90% LTV mortgages are considered high-risk for lenders, resulting in higher interest rates compared to lower LTV mortgages. Additionally, there may be other costs involved, such as stamp duty, solicitor's fees, and mortgage arrangement fees.
