LTV - can anyone give some advice

H

HouseBuyer10

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Hi everybody,

We're trying to decide what rate to choose for our mortgage and, even if my husband and I Googled a lot of info, we're still not very sure which one to choose.

The first question we asked ourselves is which the safest choice is: fixed, variable or split? It seems that the split one is safer than the variable rate and it gives up the possibility to pay a lump sum in the future.

Secondly, we still don't understand what the various variable options mean and which one is more advantageous for us:
LTV Variable >80%
LTV Variable > 50%< =80%
LTV Variable< =50%

I'd really appreciate it if someone could explain these to me.

Thanks a mil.
 
Those options relate to the Loan to Value ratio of your loan amount versus the value of your property. You don't get to pick one, it depends which band the loan falls into when the property has been valued. The lower your loan in relation to the value of the house the better the rate you get in general as the risk to the bank is lower. If for example the value drops then if you had only borrowed a lower percentage of the house value the bank is better protected should they have to repossess and sell so they offer better rates to those who borrow less.

The lowest rate is going to be if you are borrowing less than 50% of the purchase price.
 
Thanks a mil, Monbretia, I understand that now. The bank asked us which pay rate we want to go for, so I assume they meant which one out of fixed, variable or split.
Is there one which is the best overall and in what situations?
I really appreciate your help, thanks a lot again.
 
Housebuyer, you need to give more details. Income, job security, kids, price, mortgage, interest rate options etc. Every case is different.
 
The answer I used to give people to that question was if you can afford to take the risks of the ups and downs of a variable rate you will probably (note probably, kind of crystal ball gazing!) do better over the term of the loan.

However if a rate rise particularly in the early years could be a difficulty for you then go for fixed, be aware of potential decreases in income in coming years, e.g. childcare etc.

Lot to be said for the split option, kind of the best of both worlds if the variable rate is reasonable. You will gain from any decreases in variable on half but be protected from increases on the other half. Gives you the option to increase payments on the variable bit if you have the money or pay off lump sums should you be so lucky. Do you have to split 50/50?

There is no one size fits all, all depends on your own circumstances and your own attitude to risk.
 
Thanks a lot for your reply, Monbretia.
If we go for a variable rate, what percentage could the rate go up from month to month? Are we talking about 0.2% or 1/2 % or even more?

Thanks a mil.

Monbretia said:
The answer I used to give people to that question was if you can afford to take the risks of the ups and downs of a variable rate you will probably (note probably, kind of crystal ball gazing!) do better over the term of the loan.

However if a rate rise particularly in the early years could be a difficulty for you then go for fixed, be aware of potential decreases in income in coming years, e.g. childcare etc.

Lot to be said for the split option, kind of the best of both worlds if the variable rate is reasonable. You will gain from any decreases in variable on half but be protected from increases on the other half. Gives you the option to increase payments on the variable bit if you have the money or pay off lump sums should you be so lucky. Do you have to split 50/50?

There is no one size fits all, all depends on your own circumstances and your own attitude to risk.
Click to expand...
 
It won't go up as frequently as every month but trying to guess what rate increases could happen is again unfortunately crystal ball stuff :)
 
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