Property valuation v Purchase Price
In the current lending and mortgage marketplace a first time buyer or Next Time Buyer/Home Mover will need their own deposit to put towards the purchase of the property. The amount of this deposit has to be at least 5% ( on a Help to Buy mortgage ) of the purchase price or Property Valuation whichever is the lower – for example if the purchase price is lower than the Home Report Single Survey property valuation then the mortgage lender effectively defaults the property value to the actual purchase price . This after all is the price being paid and this sale price will also be registered on the land register which is freely available for anyone to view online through 3rd party services like www.ourproperty.co.uk
Therefore most mortgage lenders will only lend up to 95% Loan to Value (LTV) (on a help to Buy mortgage) before they will accept a mortgage application. This helps reduce the mortgage lenders exposure to risk in the event of property prices reducing or in the event of repossession due to defaults on the regular monthly mortgage payments by the mortgage account holder or both!!!
Therefore because of this perceived risk by mortgage lenders the mortgage interest rates charged by mortgage lenders on mortgage products at 95%LTV will be the highest of all mortgage application categories regardless of the mortgage applicants own employment status or income and ability to pay.
There are some unique exceptions to this property value versus purchase price rule and these include concessions like family connected property purchases, family gifted deposits, Parent Gifted deposits and Landlord gifted deposits and these are explained in our Mortgages section.
95% LTV mortgages with a 5% deposit are only available as a Help to Buy mortgage for a mortgage applicant that only owns one property after the Help to Buy mortgage and purchase.
So a FTB or even a Homeowner who is selling their current property will qualify for a Help to Buy mortgage at 95% but a home mover who has or retains their current property or retains any other property will not qualify for a Help to Buy mortgage and therefore will need a 10% deposit as a minimum.
Therefore to obtain better mortgage interest rates the mortgage applicant has to find and contribute more of a deposit to reduce this risk to the lender. So if you have a 15% deposit and only require 85%LTV from the mortgage lender then the mortgage interest rates offered by the mortgage lender will be more competitive and lower than mortgage products at the 90 or 95% LTV category.
The mortgage interests rates offered by mortgage lenders continue to get more competitive and lower through all the main Loan To Value thresholds of 80% - 75% - 70% - 65% until you get to 60%LTV which is the level where you will be able to obtain the very lowest and most competitive mortgage rates available whether it be a Tracker rate, Fixed rate, Discounted Rate, Off-set rate, Lifetime Tracker rate, Capped Rate, Capped and Collard rate, Combination Rate or Buy to Let rate.Apply now