In this post, we examine why maximising your loan-to-value ratio is important and advise you on ways to maximise your borrowing potential with your collateral.
Loan-to-value ratios (LTV) give lenders a base to decide how much they are prepared to lend based on the value of the security offered as collateral. It is a calculation based on the risk in how much you want to borrow compared to the protection they see in your assets.
Lenders also set maximum LTV ratio caps and limits for many borrowing types. In essence, the lower the LTV ratio, the more expensive your borrowing is likely to be. However, for some borrowers, a 100% mortgage can be obtained, and help from experienced brokers can help you secure more favourable LTV ratios at better rates to maximise your borrowing power.
LTV is All About Lender Risk
Lenders look to balance risk and reduce the risk that payment default or security values decrease according to the ratio of capital required against the assets and security value—the more risk to the lender, the lower the risk to the borrower. Reducing the actual or perceived risk the lender feels is often complex, yet it can help you achieve higher LTVs and rates that give you the funds you need to move forward.
The type of asset you offer will also impact the LTV caps. For crypto or security-backed lending, expect respective caps of around 50-60% LTV, with many offering far less. Using a broker enables borrowers access to lenders most likely to offer higher LTV ratios and more competitive borrowing costs.
Higher LTVs can be accessed if your application and status are presented favourably. Suppose you can demonstrate excellent long-term liquidity and significant net worth, but it is tied up in fixed assets that you aren’t ready to liquidate to make your purchase. In that case, we help maximise your chance of obtaining a high-value mortgage or corporate finance by presenting your case and assets to achieve higher LTV ratios than you are likely to achieve without broker assistance.
Complex assets can mean many lenders refuse, offer unfavourable terms or now choose only to deal with broker-assisted clients. Our approach is tailored for each client to help lenders understand the unique and often complex situations of high net-worth individuals looking to bring a structured lending deal that reduces the chances of refusal and meets the borrower’s needs. A good broker will build relations that benefit clients by submitting applications, giving a solid case so lenders can clearly understand the risks of lending, both now and throughout the loan term and that you have considered exit plans.
Maximising Your LTV
Many lenders may offer finance, yet knowing their quirks and niche lending streams in detail will help you approach only those with a realistic chance of success. Many mainstream lenders typically operate with fixed lending criteria and maximums that they won’t deviate from. Choosing a suitable broker can help you access niched lending sources that only accept applications made through a broker or will consider assets that others won’t. If you want a high LTV mortgage or loan, approaching niche lenders through a broker with expertise and experience specialising in high-value lending and working with high-net-worth individuals could be the only way to succeed.
Lenders are more likely to offer higher LTVs when applications are received through an independent broker who has already vetted and screened the prospective borrower and identified the best lenders most likely to view and negotiate the application favourably.
When a single security or asset class doesn’t yield the borrowing results you want, then you should consider using multiple asset classes as security. This may involve approaching multiple lenders and maximising the use of each asset to suitable lenders to open up the amounts required.
Property financing through mortgages and bridging loans or commercial property finance, as well as securities-backed, luxury asset or cryptocurrency, can be combined collateral to achieve higher LTV ratios secured depending on how much net worth is invested in each. An approach that looks at your borrowing needs and objectives to work out a path that best combines asset use to finance your borrowing as cost-effectively and efficiently as possible and your case is presented to suitable lenders in a way they understand.
The more prepared you are, the more you will achieve. It is worth spending time analysing your current situation and finances to maximise your borrowing power and ensure that they are on the firmest footing possible. Lenders need to understand the complexities of your financial situation clearly, and any cause to hesitate will lead them to decline to lend at all or impose low LTV or higher charges.
An experienced high-value lending broker will know how to present your case the way lenders want to see it, improve their understanding and answer questions to reduce the likelihood of friction or negative responses. Expert advice on shrewd restructuring or presenting the less apparent facts in your situation can make a material difference to their response.
Examples That Can Help Raise LTV Offers
- Highlighting yearly bonuses or a strong track record of regular performance-based bonuses.
- Choosing lenders who will consider dividend income or take a business profit rather than personal tax returns as an indicator of wealth for those who reinvest profits or don’t take a large salary.
- Presenting additional income streams, such as rental income or other UK and global income.
- Showing unusual income streams, such as investment portfolio income that you live off.
- Equity or income from a business you worked for or sold as part of a sale or exit package.
- Identifying lenders who understand income streams in currencies that mainstream lenders find challenging.
As you can see, maximising lending opportunities means making the most of your loan-to-value offers. Particularly in higher value loans with varied or unusual collateral to be considered, the best terms are usually reserved for those making applications with the support of a finance broker who can give you the benefit of their experience within niche and specialist lending markets.