LTV & Negative Equity

12th February 2018 Latest News

What are “Loan-to-Value” and “No negative Equity”?

LTV or loan-to-value is worked out depending on how much mortgage you have in relation to how much your property is worth.

For example if you have a mortgage of £150,000 on a house that’s worth £200,000 you have a loan-to-value of 75%. Therefore you have £50,000 as equity.

Its an important factor when you come to consider equity release as LTVs reflect the risk a funder or life company offering equity release is prepared to take.

During the credit crunch many people found themselves in negative equity as they had previously taken out high loan-to-value mortgages on the assumption that house prices would only go up. When house prices fell some borrowers found themselves in the position of owing more than the property is worth.

All plans considered by ERIC offer a no negative equity guarantee. This means that the amount a borrower has to pay back is fixed, regardless of house price changes, and they will never fall into negative equity.

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