Loan To value, or LTV, is a term you will hear throughout your mortgage application. It refers to your mortgage amount as a percentage against the value of the property. So, for example, a £70,000 mortgage loan against a property value of £100,000 is 70%, so in this case your deposit would be £30,000 therefore, 30%.
The lower your Loan To Value the better interest rates you will be offered by your mortgage lender. This is because mortgages are what are known as “risk-based lending”. Lenders are looking at how risky you are as a borrower and one of those risks is how much money are you personally willing to contribute to the purchase of your new home. They believe the more money you put down the less likely you are to not pay the monthly mortgage payments because your own money is at risk, so they will offer you a lower interest rate because of this.
