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Why does having a healthy deposit matter?

Updated: Mar 2, 2021

If you’re self-employed, a healthy deposit will boost your chances of securing a mortgage.

Lenders look at your loan to value ratio (LTV) to help them decide whether to lend to you or not. The higher the deposit you can put down, the less risky you’ll appear to the lender.

LTV is the size of your mortgage as a percent of the total property value.

Example: Say you want to buy a property worth £300,000. You already have a deposit of £30,000, so you need to take out a mortgage of £270,000.

That makes your LTV:

270,000 / 300,000 = 0.9

x 100 = 90%

The higher your deposit, the lower your LTV. So if you put down a 10% deposit on your home like in the example (without using any schemes to buy it) that’s a 90% mortgage, or 90% LTV.

Lenders also use LTV to assign interest rates – usually, the greater the deposit you can put down, the better the interest rates that will be available to you.

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