min LTV mortgage

delux

This was news to me that there is a min LTV loan that the banks will give which seems to be 50%. So i'm curious about the situation where someone has, say, 75% of the price of the house in cash and only needs 25% as the mortgage. OK that's fine you could still go for the 50% mortgage and keep the cash in the bank. But is there anything to stop you, say 1 month later, using the cash to pay off half of the mortgage so you're effectively left with a mortgage for 25% of the property?
Does that make sense?

D3PO

delux wrote: »

This was news to me that there is a min LTV loan that the banks will give which seems to be 50%. So i'm curious about the situation where someone has, say, 75% of the price of the house in cash and only needs 25% as the mortgage. OK that's fine you could still go for the 50% mortgage and keep the cash in the bank. But is there anything to stop you, say 1 month later, using the cash to pay off half of the mortgage so you're effectively left with a mortgage for 25% of the property?
Does that make sense?

I dont see any reason why not.

The_Conductor

Depends on the mortgage types. Often there is a break clause- where if you pay off the mortgage (or a portion of it) earlier than sanctioned- you are liable for a particular percentage of the interest that the lending institution might have earned on that part of the mortgage, had it not been repaid early.

It used be the case that an unsanctioned repayment of a mortgage cost 25% of the 5 year compounded interest on the o/s balance, prior to the repayment (you get the picture). You really need to ask around and check out the fine print.

delux

ok thanks, that makes sense.
I knew there had to be some penalty but didnt think of that clause.