What is an 85% LTV mortgage
An 85% LTV mortgage lets you borrow 85% of the purchase price of a property.
You pay the rest with a 15% deposit before the mortgage starts.
Or if you’re moving home or remortgaging you’ll need 15% equity in your home, or equity in your home and additional savings.
LTV stands for loan to value.
It’s the ratio between the loan you take out and the value of the property, and it’s worked out as a percentage.
Lenders take LTVs into account when deciding how much they’ll lend you and the interest rate they’ll charge.
The higher the LTV, the higher the interest rate you’ll pay.
This is because the risk to the lender increases when you borrow more of the purchase price.
Should I get an 85% LTV mortgage
An 85% LTV mortgage could be right for you if you’ve got 15% of the purchase price to put down as a deposit.
The recommended deposit is about 20%, so you’re not far off.¹
The lower the LTV the lower the interest rate as lenders see the loan as less risky.
If you want to get a better interest rate so you have smaller monthly repayments you should save for a bigger deposit.
Best 85% LTV mortgage
All lenders offer 85% LTV mortgages, so there’s a lot of choice.
Make sure you know how much a mortgage deal will really cost before applying for it.
This is known as the true cost. It’s the total amount you'll pay back over the initial fixed or discounted period.
The true cost of your mortgage is easy to work out.
Just add up the interest, capital repayments and fees, then take away any incentives the lender’s offering, like cashback.
A broker can find the best 85% LTV mortgage deal for you if you need a hand.
Everyone’s personal situation is different and a broker will look for a deal that suits you best.
Trussle, for example, works with 90 lenders offering about 12,000 deals.
Lenders can only offer you their own mortgages so you’ll have much less choice.
Best buy to let 85% LTV mortgage
Best 2 year fixed 85% LTV mortgage
When you’re looking for the best 2 year fixed mortgage with an 85% LTV you’ll find lots of options.
Some deals will have higher interest rates and lower fees, while others will have higher fees and lower interest rates.
Read our guide to learn how to compare mortgage rates and deals.
Best 5 year fixed 85% LTV mortgage
If you’re looking for a 5 year fixed mortgage deal with an 85% LTV now could be a good time.
Interest rates on 5 year fixed rate mortgages are currently a lot lower than they have been.
Read our guide on fixed rate mortgages to find out more.
Best interest only 85% LTV mortgage
Very few lenders offer interest only 85% LTV mortgages.
Most will want you to have an LTV of 75% or lower.
This is because the higher the LTV the bigger the risk as you’re borrowing so much of the property’s value.
There’s an even bigger risk with an interest only mortgage because you only pay interest during the course of your mortgage and none of the loan itself.
If house prices fall, like they did during the last financial crisis, you could end up in negative equity.
This is when you owe more on your mortgage than your home is worth.
Being in negative equity could be a problem if you want to move or remortgage.
You might end up:
unable to switch mortgages to get a better rate
trapped on your lender’s standard variable rate and paying more than you should
stuck with a house that won’t sell for a price that covers your mortgage
The few lenders that do offer interest only 85% LTV mortgages have very strict rules about who they lend to.
You might not be allowed to repay the loan at the end of the mortgage by selling your property, which you can with other interest only mortgages.
This means your repayment options might be limited to:
equity in another property
stocks and shares
You may also face a high interest rate as your loan will be a bigger risk than normal.
Remortgaging to an 85% LTV mortgage
If you’re coming to the end of your initial deal, and have 15% equity in your home, you may be able to remortgage to an 85% LTV mortgage.
This means your repayments should be lower as you’ll get a better interest rate.
You could also remortgage to an 85% LTV mortgage if you want to borrow some of the equity in your home for improvements, like building an extension.
¹ Money Advice Service: How much deposit do I need for a mortgage?
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