Buying your first home is likely to be one of the biggest purchases you will ever make in your lifetime, so it’s understandable if you feel anxious about it. If property ownership feels like stepping into the unknown, then let us put your mind at ease by answering some of the most common questions our first-time buyer customers tend to ask.
What does LTV mean?
Loan to value (LTV), is the amount of mortgage you borrow versus the value of the property you wish to purchase. If you’re wondering how to work this out, take a look at this example:
- If you wish to purchase a house for £250,000, and if you have a deposit of £50,000 then you will need to borrow £200,000.
- To calculate the LTV, you divide the amount you need to borrow, £200,000 by the value of the property, £250,000 which gives you 0.8.
- £200,000 ÷ £250,000 = 0.8
- Times this by 100 and you get 80%.
- 0.8 x 100 = 80% LTV
- This means if you buy a property for £250,000 with a £50,000 deposit, borrowing £200,000, your LTV is 80%.
But why does LTV matter?
The lower your LTV, the more likely you will be considered a low risk borrower. This means there will be more options available to you at the best rates.
Can I get a loan for my deposit?
You will not be able to get a loan for your deposit. A mortgage is lent to you based on what payments you can afford on a monthly basis, along with a deposit from you to support the purchase. If you have to take out a loan for the deposit, it suggests you can’t really afford the property in the first place. Rather, you might be able to borrow 100% of the purchase price, if you have a guarantor (such as a parent) who can support you with the deposit. However, we always recommend you speak to a mortgage adviser first, so you have a clear idea of what options are available to you.
Could I lose my deposit?
When you make an offer on a property, it may take some time for all the legal and financial paperwork to be carried out. You need to send your deposit to your legal company so that they can exchange contracts. This guarantees your purchase and protects your deposit, should the sale fall through after exchange. If the purchase falls through prior to exchange, you may incur some fees for finance and legal work carried out, but rest assured you won’t risk losing any of your deposit money. However, if the purchase falls through after exchange because you simply change your mind and pull out, then the seller would keep your deposit, as per the contract. Property purchases can fall through prior to exchange, but it is rare for there to be a problem after contracts have been exchanged.
How do I get a deposit back if my purchase falls through?
When you exchange contracts, this means the buyer and seller are legally committed to the purchase and sale of the property. If you’ve already exchanged contracts and then the purchase falls through because the seller has dropped out, you will receive your full deposit back from your legal company.
How can I make buying a house less stressful?
It’s totally normal to experience anxiety when purchasing a house. Fortunately, that’s the benefit of mortgage advisers. Part of their job, alongside providing advice, is to take that stress and worry off your shoulders.