Mortgage Loan to Value (LTV)
The ‘loan to value’ or LTV is the ratio between how much you want to borrow and the lenders valuation of the property - so if you wanted to borrow £75,000 on a property valued at £100,000, the LTV would be 75% with a 25% deposit (£25,000)
The LTV is determined by a number of factors & for your convenience we have listed the main ones below as a guide.
The main factors affecting LTV where bad credit is concerned are...
Your ‘status’
Your ‘status’ simply refers to your ability to prove income.
If you are employed with wage slips, on contract or self employed with certified accounts you would apply for a ‘status’ mortgage.
If you are on contract or self employed and are unable to provide satisfactory proof of income, you would apply for a ‘non status’ or ‘self cert’ mortgage.
Affordability
Affordability, or the way in which a lender decides if you can afford a mortgage will differ from lender to lender and not being able to afford the full loan amount you need could mean the lender will restrict the loan to value up to what they deem is affordable - the upshot being you may need a bigger deposit!
As different lenders work things out differently and your unsure about your affordability its best to speak to an experienced mortgage advisor to point you in the right direction.
The property type
The type of property you want to secure funds against can influence the loan to value allowed by a lender, for instance, a none standard construction property (such as concrete prefab or timber) can have LTV limits, if you require an LTV of above 65%, its probably best to go for a more traditionally built property.
Adverse credit and loan to value
Adverse credit is one of the main influences on mortgage loan to value and as such, there are many different things to be bear in mind when looking for a property with if you have previous bad credit.
The main things a lender will look at when regarding bad credit & loan to value are...
Bad Credit type
This is the type of bad credit a person has - missed payments, defaults, CCJ’s, IVA, discharged bankrupt etc
Bad credit mortgage’s allow combinations of bad credit types such as a number of missed payments, defaults & CCJ's - Baker Financial have access to all these different mortgage products.
Number of Bad Credit items
The amount of the different types of bad credit.
You could have 3 defaults and 1 CCJ, which will fit on a certain mortgage product, but if you had 1 default and 3 CCJ’s the mortgage product would probably be different.
Some lenders work of the number of bad credit items rather then the amounts such as – up to 3 CCJ’s registered rather than the CCJ’s individual or total pound (£) amount.
The pound (£) amount of the bad credit
The actual amounts in pounds (£) you owe - you could have 1x default for £3,000, 1x CCJ for £1,000 and another CCJ for £300 - some lenders work off totals (such as - up to £10,000 total CCJ’s) & some work of both number and pound amount (i.e. max 3 CCJ's not totaling more than £10,000)
When the bad credit was registered
The date bad credit items were registered on your credit file is an important factor to be considered. Some lenders view 'bad credit' registered some time ago differently than more recent 'bad credit' and may not take certain bad credit issues into account depending on when it was registered.
You can view the number of bad credit items, when the bad credit was registered and the pound (£) amount of each individual credit item by getting hold of your credit report and letting us explain what the information on your report means in real terms.
All mortgage lenders have their own criteria for deciding how much LTV they will allow and which mortgage product has what maximum LTV, there are literally thousands of different mortgage products to choose from and getting the best available could save you a small fortune over the life of your mortgage - we would recommend speaking to a bad credit mortgage specialist.
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