If you have limited equity in your home you can get hold of a mortgage but it is going to cost you more for the privilege – unless a good mortgage broker can help you put together an affordable deal.
It’s a fact that borrowers with small deposits are paying substantially more for mortgages according to Defaqto. It says the credit crunch and recession has made lenders much more risk-adverse, which means they are demanding more money for riskier loans, like high LTV deals.
David Black, banking specialist at Defaqto says: “Three years ago there was little difference in the interest rates charged whether you had a 10% deposit or a 25% deposit. Since the credit crunch the situation has changed significantly and those seeking a higher LTV mortgage have to pay significantly more.”
Defaqto says an average borrower with a 90% LTV interest-only loan pays £9,180 for a two year fixed rate whereas a borrower with a 75% LTV loan for the same amount will only pay £6,330 – a difference of £2,850 with an interest rate difference of 1.90%.
It might be that through a mortgage broker, who has close relationship with mortgage lenders of all shapes and sizes, can find you a high LTV mortgage that doesn’t break the bank. It’s true that less equity means higher rates, but a good broker may be able to prove that wrong.
SOURCE: Defaqto, 18/04/10
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