Compare The Best 80% LTV Buy to Let Mortgages with Echo Finance (2024)

FAQs

What type of loan would most likely have an 80% LTV ratio? ›

LTVs at 60% or below are considered the best in terms of getting the best mortgage deals. Ideally, lenders like to see LTVs at 80% or below. However, it is possible to sometimes find mortgage deals if your LTV is above 90%.

LTV is the inverse of a borrower's down payment. For example, a borrower who provides a 20% down payment has an LTV of 80%. LTV is important because lenders can only approve loans up to certain ratios—80% for Fannie Mae and Freddie Mac loans, for example.

Yes, you can borrow up to 85% of the value of a property on a buy to let mortgage. This means you can put down just 15% of the value as a deposit.

For example, suppose you buy a home that appraises for $100,000. However, the owner is willing to sell it for $90,000. If you make a $10,000 down payment, your loan is for $80,000, which results in an LTV ratio of 80% (i.e., 80,000/100,000).

The Ideal LTV Ratio

If you're aiming for the sweet spot, an LTV under 80% is generally where you want to be. While higher LTVs can help you get on the property ladder faster, they come at a cost—higher interest rates. It's a balancing act between immediate access and long-term financial health.

Lenders calculate LTV by dividing the loan amount by the property's appraised value. For example, if your property is valued at $200,000 and you want to take out a real estate loan for $150,000, the LTV ratio would be 75% (150,000/200,000).

PMI is likely to be required on mortgages with a loan-to-value ratio (LTV) greater than 80%. Avoiding PMI can cut down on your monthly payments and make your home more affordable. Anticipated appreciation of the value of the home is a major determining factor when choosing a path toward avoiding PMI.

4. Conventional loan: up to 97% LTV allowed. Conventional loans are guaranteed by Fannie Mae or Freddie Mac. Both groups offer 97% LTV purchase mortgages, which means you will need to make a downpayment of 3% to qualify.

The key thing you'll need to be eligible for an 80% LTV mortgage is a deposit worth 20% of the property value. Lenders usually need you to prove that your deposit funds came from an approved source. For a 20% deposit mortgage application, much like any other, you'll also need to meet the lender's other criteria.

Is a type of mortgage where the LTV is greater than 80%? ›

High-ratio mortgage / conventional mortgage

A high ratio mortgage is a mortgage loan higher than 80% of the lending value of the property. A conventional mortgage is a mortgage loan up to a maximum of 80% of the lending value of the property.

Conventional refinance: For conventional refinances (including cash-out refinances), you'll usually need at least 20 percent equity in your home (or an LTV ratio of no more than 80 percent). This also helps you avoid private mortgage insurance payments on your new loan.

A 60% LTV ratio is considered quite low, so you'll generally be seen as less risky by the lender which should help you access your best mortgage rates.

A good benchmark for LTV to CAC ratio is 3:1 or better. Generally, 4:1 or higher indicates a great business model.

Lenders generally consider higher LTVs to be riskier because their potential loss would be greater. Consequently, lenders often mitigate their risk by charging higher interest rates on your mortgage loan, and vice versa—a lower LTV could lead to a more favorable mortgage rate.

Most lenders apply an LTV ratio 80 percent or less threshold for borrowers to secure the lowest possible market interest rate on mortgage financing agreements. Applicants with an LTV ratio 80 percent or higher are usually required to purchase PMI, which increases the total financed amount by up to 1 percent annually.

Conventional Loans

The minimum down payment for a conventional loan is 3%, which means you can qualify for a conventional loan with an LTV of 97%. But if you can make a 20% down payment or more, you'll avoid paying PMI.

Private mortgage insurance (PMI) is only required on Better Mortgage conforming loans with a loan-to-value ratio (LTV) higher than 80%. Better Mortgage waives the PMI requirement for jumbo loans with loan-to-value ratios up to 89.99%.