Put simply, an 80% mortgage is a mortgage where you borrow 80% of the value of the property you are buying. So if your new house costs £150,000, your mortgage will be £120,000.
An 80% mortgage means your mortgage loan has a loan to value (LTV) ratio of 80% – you have been loaned 80% of the value of your property.
Why have an Eighty Percent mortgage?
A general rule with mortgages is that the bigger your deposit, the better the deal you can get. This means access to lower interest rates, lower monthly payments or perhaps a shorter mortgage term.
The 20% deposit you will need to provide for an 80% mortgage is large enough to ensure that most lenders will offer you their best deals.
You can also be sure that you will not be subject to any Higher Lending Charges, or HLCs – these are fees some lenders charge for people borrowing more than 90% of the value of the property they are buying.
Who Provides 80% Mortgages?
Most lenders will provide 80% mortgages – it is a very common level of borrowing and puts you firmly in the mortgage mainstream.
You will have access to a wide variety of types of mortgage, such as:
· Fixed rate
· Variable rate
· Discounted rate
You will also have access to flexible and offset mortgages, which allow you various combinations of flexible repayments and allow you to use your savings to reduce the amount of interest you have to pay.
You may find you have a surprisingly wide choice of mortgages!
How Do I Choose An 80% Mortgage?
With such a wide choice, it may be difficult to work out exactly which mortgage is best for you.
If you are in that position, an independent mortgage broker should be able to explain the different options to you without obligation and to help you understand which type of mortgage will suit your needs best.