Loan To Value
As it is quite a well used term it is worth working out what it means, and as ever with financial terminology, often it is better to see by means of a simple example what this is.
So let's imagine that your house is worth a princely sum of £200,000, so a little above the average house value in the United Kingdom. Now, if you were to have a mortgage on that property that is £100,000, then you would be said to have a Loan to Value of 50%.
And if you were to have a mortgage of £160,000 then that would be a loan to value of... yes, you've guessed it, 80%.
As this should show, then, the loan to value is simply what percentage of the value of your home your mortgage is. Thus if your mortgage is 3/4s the value of the house, then it would be a loan to value of 75%.
It is useful to bear this figure in mind to get a feeling for what sort of mortgage you have relative to your property value and a good yardstick when you remortgage to get a feel for what the overall new mortgage you are considering will look like, as it were.
Generally it is a good idea to try and keep the LTV lower in the sense that the lower the mortgage relative to the property then the better in terms of having less to pay off and of course also if house prices fall then the more they have to fall to put you into negative equity. With an LTV of 90% of more then it only takes a 10% fall in house prices for the mortgage to be the same amount as the value of the house itself; often charges are higher too for a LTV that is around the 90% rate or even above.
More property related articles:
- Quick Information on Credit Scoring
- House Price Index
- Why Buy in Cyprus
- Buying in a Village Might be a Good Investment
- Overseas property mortgages
