How to Improve Your LTV for a Bad Credit Mortgage

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In the realm of mortgage financing, understanding and optimizing your Loan-to-Value (LTV) ratio can significantly impact your ability to secure a mortgage, especially if you have a less-than-ideal credit score. If you are seeking a mortgage, but feel as though you have “bad credit,” navigating the complexities of LTV becomes even more crucial.

Understanding Loan-to-Value (LTV) and Its Significance

Loan-to-Value (LTV) is a financial metric that represents the ratio between your loan amount to the appraised value of your property. Put simply, it determines what percentage of your home’s value is equity, and what percentage is a loan. Lenders often use this ratio to assess the risk associated with your mortgage application. A lower LTV indicates less risk for the lender, as it suggests that the borrower has a more substantial equity stake in the property.

For individuals with bad credit , a higher LTV can pose challenges in securing a mortgage, as it implies a greater risk for the lender. Consequently, lenders may offer less favourable terms, such as higher interest rates or larger down payment requirements, in order to mitigate this risk.

Strategies to Boost Your LTV Ratio

Luckily, there are a few strategies you can employ to improve and boost your LTV ratio, if you are not currently satisfied. Here are a few examples:

  • Increase Down Payment: One of the most effective ways to improve your LTV ratio is to make a larger down payment. By putting more money down upfront, you reduce the amount of the loan relative to the property's value, thereby lowering your LTV ratio. This can make you a more attractive borrower to lenders, potentially resulting in better mortgage terms.
  • Improve Credit Score: While it may take time, taking steps to improve your credit score can positively impact your LTV ratio. A higher credit score may qualify you for a larger loan amount or better interest rates, reducing the loan-to-value ratio. Paying bills on time, reducing outstanding debts, and correcting any errors on your credit report are some strategies to consider.
  • Consider Co-Signers or Guarantors: If your credit history is less than stellar, you may consider enlisting a co-signer or guarantor with a stronger credit profile. Their involvement can potentially lower the perceived risk for lenders, leading to a more favourable LTV ratio and mortgage terms.

Expert Advice for Securing a Bad Credit Mortgage with a Favourable LTV

  • Seek Professional Guidance: Consulting with a Clover Mortgage broker or financial advisor specializing in bad credit mortgages can provide valuable insights into your options. They can assess your financial situation, offer personalized advice, and help you navigate the mortgage application process to maximize your chances of securing a favourable LTV.
  • Shop Around for Lenders: Don't settle for the first mortgage offer you receive. Shop around and compare terms from multiple lenders, including traditional banks, credit unions, and online lenders. Each lender may have different criteria and offerings, allowing you to find the most competitive option for your circumstances.
  • Be Transparent and Prepared: When applying for a mortgage with bad credit, honesty is key. Be upfront about your credit history and financial situation with potential lenders. Additionally, gather all necessary documentation , such as income statements, tax returns, and proof of assets, to streamline the application process and demonstrate your creditworthiness.

In many cases, improving your LTV ratio can be an essential step in securing a favourable mortgage, especially if you have less-than-favourable credit. By understanding the significance of LTV, implementing strategic measures to boost your ratio, and seeking expert guidance from our Clover Mortgage team, you can enhance your prospects of obtaining a mortgage that aligns with your financial goals despite having less-than-perfect credit. Contact us today to get started!


How can I reduce my LTV on my mortgage?

There are a few different ways you can reduce your LTV ratio. Here are a few of the most common strategies:

  • Increase Down Payment: By putting down more money upfront, you decrease the amount of the loan relative to the property's value.
  • Pay Down Existing Mortgage Balance: If you already have a mortgage, making additional principal payments can help reduce your outstanding loan balance and consequently lower your LTV ratio.
  • Property Value Appreciation: Property value appreciation can naturally decrease your LTV ratio over time. Keep an eye on market trends and property values in your area. Renovations, home improvements, and neighbourhood development can contribute to increased property values, resulting in a lower LTV ratio relative to the property's appreciated worth.
  • Refinance Your Mortgage: Refinancing your mortgage can be an effective way to reduce your LTV ratio, particularly if your home's value has increased since you obtained the original loan or if you've made substantial principal payments.
  • Avoid Borrowing Against Home Equity: Taking out additional loans or lines of credit secured by your home's equity can increase your mortgage balance and elevate your LTV ratio.

Can I increase my mortgage with bad credit?

Here are a few strategies to consider:

  • Home Equity Loan or Home Equity Line of Credit (HELOC): If you have significant equity in your home, you may be eligible for a home equity loan or HELOC , even with bad credit. These types of loans allow you to borrow against the equity you've built in your home.
  • Cash-Out Refinance: A cash-out refinance involves replacing your existing mortgage with a new one that has a higher principal balance, allowing you to receive the difference in cash. While this can be an option to access funds, lenders typically have credit score requirements for refinancing, and you may face higher interest rates or fees with bad credit.
  • Private Lenders or Non-Bank Mortgage Providers: Private lenders or non-bank mortgage providers may have more flexibility in their lending criteria compared to traditional banks.
  • Co-Signer or Guarantor: If you have a trusted family member or friend with good credit willing to co-sign or act as a guarantor on the loan, you may have a better chance of increasing your mortgage despite your bad credit. Their involvement can help mitigate the lender's risk and improve your chances of approval.
  • Improving Your Credit Score: While it may take time, working to improve your credit score can open up more opportunities for increasing your mortgage in the future. Focus on making timely payments, reducing outstanding debts, and addressing any negative items on your credit report to gradually improve your creditworthiness.

Can you release equity with bad credit?

Releasing equity from your home with bad credit can be challenging, but it's not impossible. Equity release typically involves accessing the value tied up in your property without having to sell it. You can consider HELOCs, cash-out refinances, or working with specialist providers.

Steven Tulman
Written By Steven Tulman
“Making the process of getting a mortgage an easy and enjoyable experience for every Clover Mortgage client!”