loan to value mortage

cossie2

ive had a mortage with BOI for the last 10 years nearly. ii had a fixed rate for the past 5 years. they sent me a letter today offering me new rates and an option of loan to value mortage, my house is not in negative equity. i dont understand fully the term loan to value. could someone please explain it to me? is it of benefit to me? i dont want to reduce the term of the mortage either. any advice greatly appreciated.

phormium

Loan to Value means the amount of a loan you have in relation to the value of the house. So for example if you owed 100k and your house was worth 200k you would have a 50% LTV as you only owe half the value of your house. If you owe 100k on a house worth 125k then you have 80% LTV. Divide the loan by the value and the first 2 numbers after the decimal point are the LTV percentage

The lower your LTV the less risk for the bank so they usually offer a better rate for lower loan to value loans. If the you know what hits the fan on a low LTV loan then the bank is in a better position if it has to sell as obviously the less you owe compared to the value reduces their risk of loss compared to a case where someone actually owed more than the value i.e. negative equity hence the better rates for lower LTVs

cossie2

phormium wrote: »

Loan to Value means the amount of a loan you have in relation to the value of the house. So for example if you owed 100k and your house was worth 200k you would have a 50% LTV as you only owe half the value of your house. If you owe 100k on a house worth 125k then you have 80% LTV. Divide the loan by the value and the first 2 numbers after the decimal point are the LTV percentage

The lower your LTV the less risk for the bank so they usually offer a better rate for lower loan to value loans. If the you know what hits the fan on a low LTV loan then the bank is in a better position if it has to sell as obviously the less you owe compared to the value reduces their risk of loss compared to a case where someone actually owed more than the value i.e. negative equity hence the better rates for lower LTVs

so lets say i have 170k left on my mortage. the market value of my house is 230k.... 170k is 74% of 230k.... is my mortage based on the 170k and not based on the original amount i borrowed?; im struggling to understand. sorry

amcalester

cossie2 wrote: »

so lets say i have 170k left on my mortage. the market value of my house is 230k.... 170k is 74% of 230k.... is my mortage based on the 170k and not based on the original amount i borrowed?; im struggling to understand. sorry

The rate is based on the LTV, the lower that is the lower the rate BOI will offer you.

Reason being that the risk to BOI is lower the lower the LTV is.

Have a look at bonkers.ie and plug in the numbers and it’ll give you an idea on what banks are offering.

phormium

Yes if you owe 170k now and the present value is 230k then your LTV is 74%

The original amount of the loan is irrelevant now if they are offering you a LTV mortgage at this stage as it will be based on present loan amount and value.

If you had been getting a LTV mortgage at the start then yes the original loan amount would have determined it and there used to be a situation whereby only the initial LTV ratio stood forever but some banks now are allowing revaluing of properties and offering LTV rates where applicable to existing customer.

Your LTV will go down every year as your mortgage decreases assuming the value of the house stays the same or goes up, if it starts to fall then we're all screwed again

cossie2

phormium wrote: »

Yes if you owe 170k now and the present value is 230k then your LTV is 74%

The original amount of the loan is irrelevant now if they are offering you a LTV mortgage at this stage as it will be based on present loan amount and value.

If you had been getting a LTV mortgage at the start then yes the original loan amount would have determined it and there used to be a situation whereby only the initial LTV ratio stood forever but some banks now are allowing revaluing of properties and offering LTV rates where applicable to existing customer.

Your LTV will go down every year as your mortgage decreases assuming the value of the house stays the same or goes up, if it starts to fall then we're all screwed again

is it advisable to go with LTV loan. saving myself in the long run?

phormium

If the rate is better than whatever else is on offer then no reason not to take it.

Of course the bank can change the rates again at some stage so no answer on the long term, you just need to keep reviewing it.