Loan to value is the percentage of the property value that you are borrowing. For example, if you have £20,000 equity in a £100,000 home, you effectively have a 20% deposit, meaning you owe 80%. This means your LTV is equal to 80%.
Despite Coronavirus and the forecasted economic downturn banks are still lending! And many banks are lending up to 85% with a minority still offering 90% rates. This splits homeowners into two groups, those whose loan to value is <85% and those whose loan to value is >85%.
If you are in the <85% group, you’ll have access to the whole of the mortgage market. The golden time to review the mortgage is 3 months prior to the end of your promotional rate. With social distancing still in place, you might want to consider starting the process even 5 months in advance. This will allow a review of your scenario and a comparison of the market vs your existing lender options.
Quite often, mortgage lenders offer better rates for new customers, so it can be worth switching banks. Switching to a different bank much simpler than you think, and can be easily done with the help of Fees Free Mortgages.
Applying for a new mortgage with a new lender could be tricky if you’ve been furloughed. This is because some lenders will assess affordability based purely on your furloughed income (which is up to 20% lower than usual), and others might not consider it at all.
Remortgaging with your current lender, while furloughed may be more beneficial in some cases. Many mortgage lenders confirmed that existing customers remortgaging on a like-for-like basis, won’t need to undergo affordability assessments. This means there’ll be no negative effects for people who’ve been furloughed. You may only be restricted if you try to borrow more cash.
It is always worth instructing Fees Free Mortgages to check with your current lender, whether you’re currently furloughed or not, what kind of mortgage deal they’re willing to offer you. After all, they are making money on you, so it is in their interest to keep you as a customer.
You will also have to assess your existing lender options if you find yourself in the >85% group. Most banks offer their existing customers options to remain with them, and these rates can be switched without the need for a full mortgage application, valuation or legal work. If the remortgage rate is lower than your current rate, you can even switch to the new rate up to 3 months ahead of the expiry.
Everyone’s financial situation will vary and that’s why working with a fee-free mortgage broker can help you make the right decision and get the best mortgage deal in the situation you’re in at the moment, without any extra cost for you. And if you’ve remortgaged before, don’t assume the decisions you made last time will still yield the same results. Your credit history may look different and the market has also changed drastically in the last couple of months.