When it’s time to buy property in Guildford or anywhere else, it’s important to understand the terms used by estate agents and mortgage lenders. The better you understand the house-buying process, the more smoothly it will run.

Let’s take a closer look at loan to value, also known as LTV. 

What does loan to value mean?

Loan-to-value is the ratio of value of the property you want to buy against the size of the deposit you have. It is expressed as a percentage. 

For example, you might hope to buy a property valued at £400,000 and you have £50,000 to put down as a deposit. This means you have 20% of the value already and you need to borrow 80%. Therefore the LTV is 80%. 

Why does loan-to-value matter?

Loan-to-value matters because it relates to the likelihood of you getting a mortgage. It is a good idea to have the smallest possible LTV. In other words, you have saved a big deposit which means you need to borrow less money.

In general, mortgage lenders prefer to lend to people who have saved up a sizeable deposit, because these house-buyers pose less of a risk. House-buyers who have saved up and invested their own money in their house are more likely to keep up with mortgage repayments. In addition, the smaller the proportion of a property the bank owns, the easier time they will have recouping their financial losses if they have to repossess the property and sell it on. 

But it’s not just about securing a mortgage. A lower LTV or higher deposit could also mean the lender offers you a lower rate of interest, translating into lower monthly mortgage repayments. 

What is a good LTV?

Anything below 80% is considered a “good” LTV. If you have to borrow more than 80% of the cost of the property, you could be seen as a bad risk by lenders. Try to get your LTV as low as possible. 

How can I bring down my LTV?

It is possible to bring down your LTV by both increasing your savings and considering a more modest property. 

In summer 2024, interest rates are high - this is good news for savers. If you are saving for a house deposit, talk to your bank to find your best saving option. They might be able to offer you a high-interest savings account so the money you put into it works harder and grows faster. 

While everyone has a dream home in mind, sometimes the best way to get onto the property ladder is to lower your expectations. Buying a smaller property or one in a cheaper postcode could help you lower your LTV and get a better mortgage rate. Remember, the Guildford area is a great place to buy property because all the schools are good, the area is generally safe and most houses increase steadily in value. Even small property in Guildford is an excellent investment. 

Buy and sell property in Guildford

Whether you’re buying or selling property in Guildford, Cobbles are here to help! House hunters can explore our property pages here and book a viewing through the website. And if you have property to sell, get in touch today to find out more about what we offer. 

Disclaimer:

Please note that we are estate agents, not mortgage lenders. This article is for reference only and you should contact your mortgage lender directly for specific borrowing advice.