10% deposit mortgages.

Loan to value, or LTV, is worked out as a percentage of how much you need to borrow against the total price/value of the property.

If you are buying a new property, start with the amount of money you have saved up to put towards your purchase – simply subtract this from the value/price of the property, and the result is the size of the mortgage loan you will need.

If you already own a property, you’ll just need to know much equity you have in your home and subtract this from the value of your property – again, this will give you the size of the mortgage loan you will need. (Your equity figure is the total amount you own outright, and don’t have to use a mortgage for.)

Quite simply, your LTV ratio is your mortgage amount as a percentage of the total property value.

For example, if you have saved up £20,000 to put towards a property priced at £200,000, that means you will need a loan of £180,000 which is 90% loan to value (with a 10% deposit). If you were to have a smaller sum of £10,000 saved up, you would then require a loan of £190,000 which is 95% LTV (with a 5% deposit).

If you are remortgaging your home the term ‘deposit’ refers to the amount of equity you will have, alongside any additional funds you may wish to put down or after any additional funds you wish to release – you don’t necessarily need to contribute more money when remortgaging.

So, if your existing mortgage balance is £188,500 and your property is worth £210,000, this means you have £21,500 deposit/equity in your home. Your LTV would work out to be 89.8% meaning you would be looking at a 90% loan to value mortgage.

Your monthly repayments will be based on your unique circumstances, including the amount you need to borrow, how long your mortgage will last and the interest rate payable. For an indication of the cost of a 90% LTV mortgage you can use our mortgage finder then visit our mortgage repayment calculator.

Broadly speaking the more you can contribute towards purchasing or remortgaging your home will mean a lower amount you need to borrow through a mortgage, resulting in a lower LTV ratio which should enable you to access more competitive mortgage deals. As with any big financial decision you should do your research thoroughly to see if you’d benefit from topping up your deposit to access a lower LTV band, such as a 95% loan to value mortgage.

There are a few things to expect when applying for a 90% loan to value mortgage. Crucially mortgage lenders need to ensure your mortgage is affordable and an acceptable risk – both for you and for them.

They may conduct a credit check to assess your credit history to understand your outstanding loans and credit cards (missed payments are a big red flag here). Plus they’ll need full details of your income, financial commitments and your expenditure (including travel expenses, leisure, food and more) – this will be for an affordability assessment, which all lenders must carry out to make sure your mortgage is affordable both now and in the future, even if your circumstances  or your interest rate were to change.

The million-dollar question! There’s two ways of looking at this – if you can build up a bigger deposit, you’ll most likely be able to access more competitive interest rates for mortgages at 85% LTV or even 80% LTV, potentially lowering your repayments. However, buying with a 10% deposit may enable you to get on the housing ladder more quickly, where your monthly payments will go towards paying off your mortgage debt (so long as you’ve opted for a capital & interest repayment mortgage rather than interest only).

In conclusion, there’s no easy answer and what suits one borrower may not suit another, so take time to carefully think through your situation.

These days the so-called Bank of Mum and Dad is an increasingly common way for first time buyers to get on the property ladder. Visit our gifted deposit mortgages page to read more about using funds gifted from a family member.