Loan to value (LTV) basically means the percentage of mortgage compared to the value of the house ie: if you have a 10% deposit then you are looking at a 90% LTV mortgage. If we use a well known lender like Halifax the current difference between the 90% deal they offer compared with their 85% deal there is a difference in interest rate of 2.3%. Might not sound a lot but on a £100,000 25 year repayment mortgage that would mean a difference of £141.41 per month!
Using the Mr & Mrs Smith example in my Tricks of the Trade 1 blog we have a market value of £150,000, a sale agreed price of £142,500 , giving rise to a vendor paid deposit of £7,500. However, rather than looking at a 90% LTV mortgage Mr & Mrs Smith are able to find an extra £5,000 taking their deposit up to £15,000. Constructed in the right way Mr & Mrs Smith could now be able to use the discount negotiated and obtain a 85% LTV mortgage resulting in potential savings of over a thousand pounds a year.