"90% mortgage"

SideWinder · 9 Feb 2010 at 02:41

What exactly does this mean? A friend is saying he aims to, in 5 years, get onto the property ladder with a "90% mortgage". Does this simply mean he will be supplying 10% of the total value of the house and borrow 90% of the value? Isn't 90% stupidly high?

Random late night question.

megakid · 9 Feb 2010 at 02:43

Yep - he means he plans to save up a 10% deposit and get a 90% LTV (loan to house value) mortgage.

90% used to be pretty standard - now you'll be lucky to get a decent loan rate with just 10% deposit. 20%+ is when the rates begin to get better these days.

I got a 80% LTV mortgage in Sept '07 just before the market downturn - I'm on an awesome rate and won't consider changing until BoE rates hit at least 4 - 5% (I'm on a tracker).

mike66uk · 9 Feb 2010 at 02:44

A 90% mortgage means that he will be borrowing 90% of the value of the house from the mortgage company and providing the other 10% in the form of a deposit. I would say that this is pretty common for first time buyers.

SideWinder · 9 Feb 2010 at 02:45

Are they not hard to come by? Perfectly achieveable? Any restrictions on such a mortgage?

sunnysingh · 9 Feb 2010 at 02:45

Yeh that's correct

SideWinder · 9 Feb 2010 at 03:14

...what is the "average" mortgage length?

Edit: Googled...25 years seems to be standard.

Glaucus · 9 Feb 2010 at 03:44

SideWinder said:
Are they not hard to come by? Perfectly achieveable? Any restrictions on such a mortgage?

very easy to come by. It is a very common mortgage. Yes you will pay higher interest. But it's all relative, as long as you can afford the repayments and don't stretch yourself.

dalin80 · 9 Feb 2010 at 07:48

SideWinder said:
...what is the "average" mortgage length?

Edit: Googled...25 years seems to be standard.

35 or 40 years will probably be closer to the norm for a first time buyer, then after a few years with a few more % paid off you can change to a shorter term mortgage with a lower rate.

In 3 years i should be able to swap my 35 year mortgage at £370 a month to a 25 year mortgage with payments of £300 a month.

scorza · 9 Feb 2010 at 08:16

SideWinder said:
What exactly does this mean? A friend is saying he aims to, in 5 years, get onto the property ladder with a "90% mortgage". Does this simply mean he will be supplying 10% of the total value of the house and borrow 90% of the value? Isn't 90% stupidly high?

Random late night question.

You've pretty much got it, although don't forget that your friend will also have other costs to pay such as stamp duty, solicitor's fees, mortgage arrangement fees, surveys etc. So in reality he'll need a few grand more than just 10% of the value of the house.

90% isn't stupidly high imo, though at the moment they're difficult to arrange and with higher interest rates - say 2% higher than if he had a 25% deposit.

Raumarik · 9 Feb 2010 at 08:47

AcidHell2 said:
very easy to come by. It is a very common mortgage. Yes you will pay higher interest. But it's all relative, as long as you can afford the repayments and don't stretch yourself.

Well said mate, also many people buy a house to live in and not as an investment, those folks will simply move mortgage once the fixed rate period is up if a cheaper one is available.