If you are considering selling your home and moving into a new property, then you are probably already mulling over your mortgage options and which mortgage would be best for you.

If so, then one of the most important factors you should also be considering is your Loan To Value (LTV) ratio. This will determine whether or not you are approved for a mortgage with a particular lender.

Read on to find out more about loan to value ratios and how you can find the most favourable ratio for you, to help you gain the right mortgage for your circumstances.

Working Out Your LTV

If you are not sure how to calculate your LTV ratio, what you need to do is work out how much you will need to borrow, and divide that amount by the value of the property. You then multiply that answer by 100 to get your LTV percentage.

Any number below 80% is considered to be a good LTV percentage, but lenders will obviously prefer the number to be on the lower side, as this means they incur less potential risk should you fail to make your repayments. A lower LTV ratio is also good for you, as they mean you will be paying significantly less interest than those with a high LTV ratio.

In general, 65% LTV mortgages – or a number thereabouts – can offer the ideal middle ground, providing a favourable situation for both you and your lender. However, you will need to have a
sizeable deposit on hand, so this is something to think about.

Looking To Lower Your LTV?

Having done your calculations, you may discover that your LTV number is somewhat higher than you would like. If that is the case, there’s no need to fret. There are several things you can do to help lower the percentage, here are just a few of them.

Save Up

Spend time building up your savings. If there is no urgent need to sell your current home, and you can put it off for a while, this will give you time to focus on saving some additional funds and
decreasing your LTV ratio.

Increase The Sale Value Of Your Home

Bumping up the sale value of your current property is another effective way of reducing your LTV percentage. There are a number of ways you can do this, and they don’t all have to cost significant amounts of money. If you are confident in DIY, you can make some changes yourself whenever you have some free time and funds to do so.

Choose A Repayment Mortgage

Another option for improving your LTV ratio is settling for a repayment mortgage, which means your LTV will gradually lower as you make your payments. If you have the funds at a particular time, you can even make overpayments, to make the decrease even quicker.

Final Thoughts

Educating yourself on LTV ratios and working out your own can be a big help when it comes to sorting out your mortgage for your new home. As you can see, there are also things you can do in
the meantime to help lower your percentage. Just remember – it’s a good idea to compare and contrast mortgages before you commit, to help ensure you choose the best one for you.