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Last updated
June 12th, 2022

What is an 80% LTV mortgage?

An 80% loan to value (LTV) mortgage is one that requires you to put down 20% of the property price as a deposit and borrow the remaining 80% of the property’s value from a mortgage provider.

Because you’ll need a larger deposit than say a 90% or 95% LTV mortgage, interest rates tend to be cheaper which means your monthly repayments will be lower too.

You’re also less likely to slip into negative equity, where the amount you owe on your mortgage is more than the value of your home.

How do 80% LTV mortgages work?

If you’re buying your first home and want to apply for an 80% mortgage, you’ll need to save up a deposit worth 20% of the home’s value. For example, if you’re buying a house worth £200,000, the deposit would be £40,000 and you’d need a mortgage for £160,000.

Alternatively, if you’re already on the property ladder but you’re looking to move home or remortgage, the 20% could be funded from the equity in your existing property.

The most common type of 80% LTV mortgage is a repayment mortgage. This means you repay a portion of the capital (the amount borrowed) each month, plus some interest, for an agreed period of time. By the end of the term, you’ll have repaid your mortgage in full and will own your home outright.

In some cases, you may also be able to apply for an 80% LTV interest-only mortgage. This is where you only repay the interest each month so monthly repayments are cheaper, but at the end of the mortgage term you’ll need to repay the full amount borrowed. This type of mortgage is less common as it is deemed a higher risk by lenders – although interest-only mortgages are more common for buy-to-let properties.

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Types of 80% LTV mortgages

Fixed rates

If you choose a fixed-rate mortgage, your mortgage rate and monthly repayments will stay the same for a set term (usually one, three, five or 10 years).

The advantage of this is that if interest rates rise, your monthly repayments – and therefore your monthly budget – won’t be affected. The downside is that if interest rates fall, you’ll see no benefit.

Fixed-rate deals also often have hefty early repayment charges should you need to get out of your deal early.

Standard variable rates (SVR)

You're moved to your lender's standard variable-rate mortgage at the end of your initial deal period.

This means your monthly repayments can fluctuate from month to month going up or down depending on the rate, making it harder to budget.

Tracker mortgage rates

A tracker mortgage will follow movements in another financial indicator, usually the Bank of England base rate.

This has the advantage that when the base rate falls, your monthly repayments will also go down. But when the base rate rises, your monthly repayments will become more expensive, so you’ll need to consider whether you could afford for this to happen.

Some tracker mortgages have a "floor" which means the rate won’t fall below this level, even if the base rate does.

Discount mortgage rates

With a discount mortgage, the interest rate is pegged at a set amount below your lender’s standard variable rate (SVR), typically for a term of two or five years.

So if your mortgage had a 1% discount and your lender’s SVR was 3.5%, you’d pay a rate of 2.5%. This means your mortgage rate will rise and fall by the same amount as your lender’s SVR.

Types of 80% LTV mortgages

Fixed rates

If you choose a fixed-rate mortgage, your mortgage rate and monthly repayments will stay the same for a set term (usually one, three, five or 10 years).

The advantage of this is that if interest rates rise, your monthly repayments – and therefore your monthly budget – won’t be affected. The downside is that if interest rates fall, you’ll see no benefit.

Fixed-rate deals also often have hefty early repayment charges should you need to get out of your deal early.

Standard variable rates (SVR)

You're moved to your lender's standard variable-rate mortgage at the end of your initial deal period.

This means your monthly repayments can fluctuate from month to month going up or down depending on the rate, making it harder to budget.

Tracker mortgage rates

A tracker mortgage will follow movements in another financial indicator, usually the Bank of England base rate.

This has the advantage that when the base rate falls, your monthly repayments will also go down. But when the base rate rises, your monthly repayments will become more expensive, so you’ll need to consider whether you could afford for this to happen.

Some tracker mortgages have a "floor" which means the rate won’t fall below this level, even if the base rate does.

Discount mortgage rates

With a discount mortgage, the interest rate is pegged at a set amount below your lender’s standard variable rate (SVR), typically for a term of two or five years.

So if your mortgage had a 1% discount and your lender’s SVR was 3.5%, you’d pay a rate of 2.5%. This means your mortgage rate will rise and fall by the same amount as your lender’s SVR.

Lending criteria for 80% mortgages

To qualify for an 80% LTV mortgage you’ll need to meet your mortgage provider’s lending criteria. This can vary depending on the provider, but on the whole, you’ll need a good credit rating and be able to show you can afford the monthly repayments.

When assessing your mortgage application, lenders will look at:

  • Your income

  • Your outgoings

  • Your spending habits

  • How much you owe on credit cards and loans

As long as the lender is satisfied you won’t be overstretching yourself and can comfortably afford your repayments, you should be accepted for your mortgage. You’ll also need to show evidence of your deposit and proof of ID.

Advantages and disadvantages of 80% mortgages

Better mortgage rates compared to someone with a 5% or 10% deposit
Smaller monthly repayments
A larger selection of mortgage deals to compare
Saving up a 20% deposit can take a long time
A higher rate of interest compared to someone with a larger deposit
More of your savings will be tied up in your home

80% LTV mortgages FAQs

Can I borrow enough for an 80% mortgage?

How much you’ll need to borrow for an 80% mortgage will depend on the value of the property you want to buy. For example, if you want to buy a property worth £250,000, you’ll need to be able to borrow £200,000. Whether you can borrow this amount will depend on how much you earn and what financial commitments you already have. To work out how much a lender will let you borrow, take a look at our mortgage calculator.

Can I get help finding the best 80% LTV mortgage?

Yes, you can use a mortgage broker who will be able to help you find a suitable deal. You could also read our mortgage guides for more information before applying.

Do I need a new mortgage if I move home?

Not always – some mortgages are portable, meaning you can transfer your existing mortgage to your new home. However, you will need to reapply for that deal and if you’re moving to a more expensive property, you may not be able to borrow more. On the other hand, if your LTV is lower for your new home, you could save money by switching to a better deal. 

Do I need a good credit record to apply?

No, but the better your credit record, the more likely you are to be accepted for a mortgage. If your credit score is low, it’s still possible to get a mortgage but it will be harder and interest rates will be higher.

About the author

Atousa Cunnell
Atousa is a Content Producer for money.co.uk, responsible for writing and editing a wide range of mortgage content that are helpful to the reader.

money.co.uk is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions.

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