An 85% LTV mortgage is where your deposit is worth 15% of the total value of a property and a mortgage provider loans you the remaining 85%.
For instance, on a home worth £240,000, you would need a deposit of £36,000 to get an 85% LTV mortgage. Your mortgage loan from the bank or building society would be £204,000. This would then need to be repaid to your lender over time, with interest added to the loan.
Most lenders offer loans of up to 95% LTV, meaning buyers can get on the property ladder with deposits worth as little as 5%. However, the smaller your deposit and the higher your LTV, the more expensive your mortgage will be.
To secure an 85% mortgage, you’ll first need to save a deposit. This could be funded from savings, investments, gifts from family or equity in your current home.
Next, you’ll need to find a lender who is willing to offer you the remaining 85% as a loan. This means meeting the lender's affordability criteria and demonstrating your earnings are high enough to make the repayments.
Once your mortgage has been agreed, you’ll have to repay the amount borrowed in monthly instalments with interest added on top.
Lenders use your loan-to-value (LTV) ratio as a factor when deciding what interest rate to offer you. The lower the LTV ratio, the better the mortgage rates are generally.
Someone with an 85% LTV mortgage will usually have a better deal than someone with a 95% LTV but will pay more interest than if they’d gone for a 75% LTV mortgage. That’s why it makes sense to have as big a deposit as possible when buying a home.
Fixed-rate mortgages is when the interest rate you pay is guaranteed for a set period – typically two, three, five or 10 years.
Your monthly repayments stay exactly the same for the length of the deal. You might pay more at the outset, but you get security in return and know what your repayments will cost you. That means you’re not at the mercy of external factors like interest rate rises.
Variable-rate mortgages go up and down each month. What decides this will depend on the kind of variable mortgage you have.
A tracker mortgage usually follows an external indicator, most commonly the Bank of England base rate.
A lender’s standard variable rate (SVR) is the mortgage you get put on when a deal ends. The provider can raise or lower it depending on their own set of criteria. It’s usually the most expensive option.
A discounted mortgage will be pegged a certain percentage below the SVR, offering you a better rate for the term of your deal.
Fixed-rate mortgages is when the interest rate you pay is guaranteed for a set period – typically two, three, five or 10 years.
Your monthly repayments stay exactly the same for the length of the deal. You might pay more at the outset, but you get security in return and know what your repayments will cost you. That means you’re not at the mercy of external factors like interest rate rises.
Variable-rate mortgages go up and down each month. What decides this will depend on the kind of variable mortgage you have.
A tracker mortgage usually follows an external indicator, most commonly the Bank of England base rate.
A lender’s standard variable rate (SVR) is the mortgage you get put on when a deal ends. The provider can raise or lower it depending on their own set of criteria. It’s usually the most expensive option.
A discounted mortgage will be pegged a certain percentage below the SVR, offering you a better rate for the term of your deal.
Mortgage providers set their own affordability criteria when deciding what to lend you. This means that they’ll examine your individual circumstances to see whether you qualify for their 85% LTV deals.
Common considerations in the lending criteria for 85% mortgages include:
Your salary
Other income, such as buy-to-let property or investments
Savings
Regular monthly outgoings
Your spending
Debts, such as loans and credit cards
Your credit rating
Any past debt issues
The type of property
The total value of the house
No, you need to have at least a 15% deposit to apply for an 85% mortgage. Here is how to get a mortgage with no deposit.
There are a few ways you can try to save a deposit for your first home. Common tactics include:
Sticking to a monthly budget
Using money given to you as a gift or inheritance
Cutting back on spending
Finding cheap rental accommodation
Switching your utility bills
Using government schemes, like the shared equity mortgages
Here are more ways to save up for a mortgage deposit.
Yes, your credit score is important as it gives lenders an idea of how likely you are to make your repayments. If you have a bad score, you will have fewer options and will usually face higher interest rates. You may find lenders refuse to offer you a deal at all. Here is how to improve your chances of getting accepted for a mortgage.
Yes, because lenders usually reserve their best rates for people who need lower LTV mortgages. Compare mortgage rates from as many lenders as possible to find the best rate on offer.
Check if you can afford one by working out how much you earn and spend. Compare this to how much buying a home will cost you.
Use the links below to find out about other mortgages
