At the end of 2020, we welcomed the return of high loan-to-value mortgages to the property market. As we continue into the new year, more lenders are following suit. Just last week, Santander launched two new 90% mortgage rates. High LTV mortgage deals such as these have re-energised the market; propelling borrowers to begin the process. The first national lockdown sparked many to reconsider what they look for in a property, with the stamp duty holiday causing them to act on those ideas.
Although we remain in an uncertain climate, the property market continues to move forward. The industry is focused on the imminent deadline of the stamp duty holiday on 31 March. While the future of the market remains unknown, industry professionals and home-movers alike are awaiting further details. After the House of Commons announced plans for a debate, news has since broken that this may be delayed. As we eagerly await a result, it is easy to overlook how products like high LTV mortgage deals can help.
How high LTV mortgage products can help balance the added costs for stamp duty land tax
High loan-to-value mortgage deals can be an effective way of balancing the additional stamp duty tax. When the tax break ends, many have concerns that the extra costs will prevent them from purchasing their ideal property. But by borrowing more money at a lesser rate you can afford a smaller deposit. That money no longer needs to be paid upfront can be put aside to compensate for the additional stamp duty.
The current average house price in the UK is £245,000. Previously, an 80% loan-to-value product would require you to put down a deposit of £49,000. An increase of the LTV by 5% would mean a deposit of £36,750 and a high LTV mortgage deal of 90% requiring a deposit of just £24,500. These deals make mortgages more accessible to buyers with smaller deposits, while also offsetting the additional costs incurred by the stamp duty land tax. The money leftover can be put towards any decorating or even potential renovations to the property after moving in.
There are more savings to be had other than the stamp duty holiday!
Although the stamp duty deadline is the focus of the market right now, there are ways to compensate. A high LTV mortgage product is ideal as it can accommodate the additional tax and more. With money left over to refurbish the property or to set aside for a rainy day, these deals are not to be missed. Discuss them with your mortgage broker or financial advisor and find out the true potential of high loan-to-value mortgage deals!
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