This loan-to-value (LTV) calculator helps you work out how much equity you have in your property, or how much deposit you’ll need to buy a new home. Understanding your LTV is crucial for getting the best mortgage deals and knowing where you stand as a buyer or homeowner.
Why Is Loan-to-Value Important?
LTV is one of the main factors lenders use to decide what mortgage rates to offer you. A lower LTV usually means:
- Access to better mortgage rates
- Lower monthly payments
- More mortgage products to choose from
- Less risk for the lender
If your LTV is high, you may face higher interest rates and need a bigger deposit to access the best deals.
What Is Loan to Value?
The loan-to-value (LTV) ratio is the size of your mortgage compared to the value of the property you’re buying or already own. It’s always shown as a percentage. Lenders use this number to assess risk and determine what rates and products you qualify for.
LTV Formula
- Loan to value (LTV) ratio = (Loan Amount / Property Value) × 100
Example: Calculating LTV When Buying a Home
Suppose you want to buy a home worth £500,000 and have a £50,000 deposit:
- Property value: £500,000
- Deposit: £50,000
- Loan required: £450,000
LTV = (£450,000 / £500,000) × 100 = 90%
| Property Value | Deposit | Loan Amount | LTV |
|---|---|---|---|
| £500,000 | £50,000 | £450,000 | 90% |
| £500,000 | £100,000 | £400,000 | 80% |
| £500,000 | £150,000 | £350,000 | 70% |
As your deposit increases, your LTV decreases, which can unlock better mortgage rates.
What Is a Good Loan to Value (LTV) Ratio?
A lower LTV is generally better, as it means you’re borrowing less compared to the property’s value. Here’s how lenders typically view different LTV bands:
| LTV Band | Typical Deposit | Mortgage Rates | Notes |
|---|---|---|---|
| 95% | 5% | Highest | First-time buyers, most risk |
| 90% | 10% | High | More products available |
| 80% | 20% | Medium | Better rates |
| 75% | 25% | Low | Excellent rates |
| 60% | 40% | Lowest | Best rates, least risk |
The lower your LTV, the more likely you are to get the best deals. If you’re remortgaging, use the amount you still owe divided by your home’s current value to work out your LTV.
Example: LTV for Remortgaging
If your home is now worth £300,000 and you still owe £180,000 on your mortgage:
LTV = (£180,000 / £300,000) × 100 = 60%
This lower LTV could help you access much better rates than when you first bought your home.
Tips for Lowering Your LTV
Lowering your LTV can save you thousands over the life of your mortgage. Here’s how:
- Save a bigger deposit before buying
- Overpay your mortgage if possible
- Wait for your property value to rise before remortgaging
Frequently Asked Questions
Does LTV affect my ability to get a mortgage?
Yes, lenders use LTV to assess risk and determine what products you qualify for.
Can I get a mortgage with a high LTV?
Yes, but you’ll likely pay higher rates and may have fewer options.
Does LTV matter for buy-to-let mortgages?
Yes, but lenders may have different maximum LTVs for buy-to-let properties (often 75% or lower).