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If you’re looking to purchase a high-value property, you’re likely already wondering what deposit size you need in order to secure a mortgage. Borrowers tend to think in terms of deposit size, whereas banks are thinking about the loan to value (LTV). Expressed as a percentage, the LTV is the size of mortgage a lender will offer you in relation to the value of the property you are purchasing or refinancing. For example, if you want to buy a million-pound property, you could have a £250,000 deposit and a £750,000 mortgage, which would be a 74% LTV mortgage.
The higher the LTV, the higher the risk from the lender’s perspective. Historically, it was possible to secure very high LTV mortgages with relative ease; some lenders were even prepared to offer 100% LTV mortgages. However, post the financial crash, lenders understandably became much more conservative in their lending. To secure a large loan now, you’ll very likely need a significant down payment or deposit to achieve a good mortgage rate.
On the high street, LTVs can range up to 95%. However, it’s important to note that mortgages offered at such a high LTV are typically only offered for smaller loan sizes. A lender taking a £10,000 deposit on a £200,000 property is understandably far less of a risk than a lender taking a £100,000 deposit on a £2million home. If you are looking for a mortgage over £1milllion, for example, you are likely to find that the LTV offered to you will be capped.
If you’re looking for a million-pound mortgage with a high LTV, a private bank is likely to be the most suitable lender for you. As standard, private banks can offer LTVs of up to 65%. With a good broker on board to help negotiate on your behalf, it’s possible to source mortgages over £1million in the 75% LTV bracket. In certain circumstances—and for clients fitting a very specific profile—they can go higher than this; for example, we work with a lender who can offer 85% LTV on mortgages up to £15million, but only for clients with a minimum income of £300,000 a year.
Many clients are keen to secure a Million-pound mortgage with a low deposit size, but lenders will not offer high LTV mortgages to clients they perceive as a risk. The property in question will also have an impact on the lender’s willingness to extend the LTV: if the lender judges the property is a good investment in a decent area, they will be more inclined to take the risk as it is far less likely the property will lose a significant amount of value.