When it comes to a loan, one of the most important elements is how much you can borrow. In most cases, you will want to borrow as much as possible, allowing you to purchase assets like residential or investment property or invest in other projects, grow a business, pay off liabilities or make other investments. So, how can you maximise what you can borrow?
What is LTV, And Why Is It Important When It Comes To Maximising What You Can Borrow?
LTV stands for loan-to-value ratio, which - in a simplified manner - is the amount you are borrowing as a percentage of the security you put forward for the loan. If you are buying a home for £1 million, for example, and you put down a deposit of £200,000 (20% of the purchase price), you will have an 80% LTV ratio mortgage: in other words, you have borrowed £800,000 from a lender to purchase the property.
Usually, the lower your LTV, the cheaper your loan will be as you won’t be borrowing as much (as a percentage of the collateral you put forward), and there is comparatively less risk for lenders than in a high LTV loan. The higher your LTV, the more costly your loan is likely to be on the basis the lender is taking on more risk to lend to you. Depending on the type of finance you are looking to access, there may be maximum caps or limits on LTV - the lender or a regulator might set these, depending on the type of finance and the size of lender writing the loan. In other cases, you may be able to secure up to 100% LTV – 100% mortgages can be possible for some borrowers (usually if specific criteria are met), for example.
As a specialist broker arranging high-value finance, we can help you access and arrange higher LTV finance packages than you can secure yourself. We will always be working to maximise what you can borrow.
Are Lenders Offering Lower LTV In The Current Economic Landscape?
Interest rates and LTV aren’t necessarily interlinked: just because interest rates are ‘high’, it doesn’t mean that lenders are offering lower LTV ratios across the board as standard, for example. The good news is that maximising what you can borrow, and high LTV financing packages are still very possible. However, currently, lenders are moving more cautiously when it comes to offering high LTV ratios because, in interest rate rising environments, there can be more inflationary pressures and economic risk. The result is that while high LTV finance is available, you will likely need to take a strategic and outside-the-box approach to maximising what you can borrow, especially if you have an unusual scenario or financing requirements.
What LTV Can I Access?
Slightly predictably, the maximum LTV a lender will offer will depend on many factors that will be ultra-specific to you, your requirements for a loan and your financial situation.
Generally, higher LTV finance packages are easier to access the more liquid you are and the higher your net worth, but everyone should explore how to maximise their LTV as there may be things you can do to increase the amount you can borrow. Provided you are borrowing responsibly, and the loan is affordable, high LTV loans may be possible in many different scenarios - even if you don’t have a ‘typical’ profile of a very liquid borrower with a significant net worth. As a specialist broker, we will usually be able to identify ways to increase the amount a lender will offer (if maximising a loan amount is your goal) and will be able to talk you through how much you can borrow, what’s reasonable to expect as a maximum LTV.
How To Access High LTV Finance
A common ‘myth’ when it comes to accessing high LTV loans is that just because your overall financial situation supports a high LTV ratio (on the basis you’re a high-net-worth individual with reasonable liquidity reserves, for example), a lender will simply offer you a high LTV loan by default. This isn’t necessarily true: lenders are always looking to share risk with borrowers, and you’ll need to present your case and reasons for a high LTV ratio carefully, providing solid rationale arguments and documents that support your case.
Lenders will want to assess your liquidity and capital reserves, overall net worth and asset base, your earning power, the stability of your employment and/or income streams, your liabilities and debt and so on. As a broker, we always need to negotiate high LTV loans - they are never a given.
Tips For Maximising What You Can Borrow
Access As Many Lenders As Possible Via A Broker
The lenders that you can access via the usual channels (online, high street, etc.) will usually offer you LTV ratios of roughly the same amount. There is likely to be some variation, but if one high street lender offers you an LTV of 65% for a residential property purchase, you’re unlikely to find a different lender that will provide you with 90% LTV, for example. This is because these lenders will usually be working towards mass-market/volume lending, and underwriting will be relatively formulaic - they generally categorise borrowers into groups and offer LTV ratios based on which group you fall into and other specific risk factors. Many mainstream lenders will also have fixed maximum LTV ratios they can’t deviate from
As an independent broker, we have whole-of-market access to all the lenders that operate in the market and, more specifically, all the lenders that will be able to offer you a loan. Within that group of lenders, we can negotiate to maximise the amount you can borrow while securing the most competitive deal for you when it comes to rates and terms. Generally, the more lenders you can access, the more likely it is that you can:
All of the above factors can support maximising what you can borrow, regardless of whether you are looking for a residential mortgage, corporate finance, real estate finance, a bridging loan, securities-backed lending or another type of loan. We know the lenders that can offer the highest LTVs, including those that only accept clients via brokers.
As an independent broker that specialises in high-value mortgages and working with high-net-worth individuals, we will be able to approach and negotiate with the lenders that can offer the highest LTV even for large loans (£1 million or more), which is typically a specialist part of the market.
Secure A Loan Against More Than One Asset
In many cases, you will want to borrow as much as you can, but the value of a single asset you own - a property, for example - won’t be enough to unlock the capital you need. However, putting forward various assets (either in the same asset class or from a mix of asset classes) can help you borrow more. The logic here is relatively simple: by using multiple assets across one or more asset classes as collateral, you can increase the amount of security you offer lenders. Lenders can, in return, often provide a more considerable loan amount.
The trick with using multiple assets for a loan is always to make sure the finance is streamlined and efficient from a structuring and cost perspective. While it’s theoretically possible to take out three separate loans from three different lenders against as many different asset classes, it’s not the most effective way of accessing the capital you need. Individual loans are unlikely to be competitive in terms of interest rate and price compared to taking out a single loan against more than one asset, and they will be time-consuming to arrange and burdensome from an administrative perspective in terms of repayment and refinancing. Separate loans, rather than a single loan secured against multiple assets, are also unlikely to maximise LTV as lenders will underwrite loans individually. Taking out a loan with a single, specialist lender that can use multiple assets as collateral for a loan will usually see you maximise what you can borrow in terms of LTV.
Securing a single loan against multiple asset classes is a specialist part of the market. Most lenders specialise in writing loans secured against a single asset class (residential property, for example). Using, for example, a residential property in Prime Central London, a trophy home in Paris and listed securities as collateral for a single loan is possible, but not all lenders can underwrite and execute these deals. Those that can tend to be boutique lenders that have small footprints and often prefer introductions from brokers or a professional network as a way of vetting the seriousness of the enquiry and calibre of the borrower. Working with a broker to plan the transaction, secure the best rate and structure the deal is imperative.
Give Maximum Financial Context
Sometimes, to maximise LTV, we need to ‘rethink’ your financial situation and see if tweaking or amending certain aspects would give a lender more comfort and allow you to access higher LTV. This sounds complex, but it’s often relatively simple and can unlock the potential to borrow significantly more. Our approach here is to understand what will give lenders more comfort and what they might see that will cause them to limit the amount they will lend. Then, it’s usually a case of documenting this in detail to make a watertight case.
This might be collecting more hard facts, evidence, or documents to showcase your financial situation more favourably or presenting some not-so-obvious facts that will make a material difference to what you can borrow.
There’s no limit to what we will look at in this respect - we will take a holistic view of your financial situation and use any elements we can to build a case to support borrowing more. For example, we might look at your track record of annual bonuses’, additional income streams, future liquidity events, liquid assets that can be put forward as additional security, etc. While it isn’t always obvious how to showcase these in a conventional finance application, we can use them as a basis for negotiations with lenders when we first approach them, which can often set the scene for higher LTV borrowing.
The views and opinions expressed in this piece are those of the author and do not constitute advise or a recommendation, nor do they necessarily reflect the official policy or position of Enness. They are also not intended to indicate any market or industry viewpoints, or those of other industry professionals.
This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation.