LTV - Need simple explaination please.

[Wollran]

Hi All

I need a very simple explanation on how the LTV thing, which I keep reading about on AAM, works.

Is it exactly what it says on the tin? When the amount that I owe on my mortgage (remaining debt) is less than 85% or 60% (or whatever) of the current value of the house, then I qualify for a reduced lending rate?

Who determines the current value of the house? Me, the bank, someone independent?
What happens if the value of the house falls? Do I no longer quality for the reduced rate?
Do I just ring up my mortgage provider and tell them that I want a reduced rate because my LTV is now less than some percentage?

Thanks in advance for the responses – ye haven’t set me wrong yet!

 

[bobk]

LTV = Loan to value and it is as you described above
Generally, the lower the risk to the bank, the lower the rate you would qualify for.

An independant valuer on behalf of the bank will determine the value of the property.

Whatever rate is on the loan offer is the rate you will stay on no matter what the property value does.

You can try and ring the bank and request a better rate, most banks will offer you something.
Generally though, you'd have to remortgage to a different lender to qualify for a substantially better rate.

 

[Humpback]

Is it exactly what it says on the tin? When the amount that I owe on my mortgage (remaining debt) is less than 85% or 60% (or whatever) of the current value of the house, then I qualify for a reduced lending rate?

Yes, if that is a facility offered by your current mortgage provider - otherwise, you can shop around.

Who determines the current value of the house? Me, the bank, someone independent?

I posted in a print out of the 2nd phase of the development where I'd bought in phase 1 showing the new selling price off plans to my mortgage provider. These new phase 2 selling prices put me under the 60% LTV, and based on only that information, my mortgage rate was reduced.

Other banks may require a new valuation - which you'll have to pay for - approximately €150.

What happens if the value of the house falls? Do I no longer quality for the reduced rate?

Do house prices fall? I would guess that unless the bank is ultravigilant, changing the mortgage rate would be the inverse of ESB and Gas prices - what goes down, will never go back up.

Unless you tell the bank that your property has fallen in value, and that you want to pay the higher rate again.

Do I just ring up my mortgage provider and tell them that I want a reduced rate because my LTV is now less than some percentage?

If you have some documentary evidence that you're house value has gone up, I'd try sending in a letter to have the evidence of the request etc.

Otherwise, ring them up and kick off the process, seeing what requirements they have.