What Is LTV? Mortgage Loan to Value Explained

LTV is one of the most important factors in determining your mortgage rate and options.

What LTV Means

Simple Definition

LTV	Meaning
Loan	Your mortgage
To	Divided by
Value	Property value
Result	Percentage

The Calculation

Formula	LTV
Mortgage ÷ Property Value	× 100
£180,000 ÷ £200,000	× 100 = 90%

LTV and Deposit Relationship

LTV	Deposit
95%	5%
90%	10%
85%	15%
80%	20%
75%	25%
60%	40%

Why LTV Matters

Risk to Lender

Higher LTV	Lender Risk
95%	High risk
90%	Elevated risk
80%	Moderate
60%	Lower risk
Less equity	Less buffer if prices fall

Impact on You

Factor	Higher LTV	Lower LTV
Interest rates	Higher	Lower
Product choice	Fewer options	More options
Approval	Harder	Easier
Monthly payments	Higher	Lower

LTV Bands

Common LTV Tiers

LTV Band	Characteristics
60% and below	Best rates available
60-75%	Very good rates
75-80%	Good rates
80-85%	Moderate rates
85-90%	Higher rates
90-95%	Highest rates
95%+	Very limited options

Example Rate Difference (Illustrative)

LTV	Example Rate
60%	4.20%
75%	4.45%
80%	4.60%
85%	4.85%
90%	5.20%
95%	5.75%

Cost Impact Example

£200,000 Mortgage	90% LTV (5.2%)	75% LTV (4.45%)
Monthly payment	£1,106	£1,006
Over 25 years	£331,800	£301,800
Difference		£30,000 less

Calculating Your LTV

When Buying

Element	Amount
Property price	£250,000
Your deposit	£25,000 (10%)
Mortgage needed	£225,000 (90%)
LTV	90%

When Remortgaging

Element	Amount
Current property value	£300,000
Outstanding mortgage	£180,000
LTV	60%

Property Value Increase Impact

Over Time	Impact
Original purchase	£200,000
Current value	£250,000
Original mortgage	£180,000
Now paid down to	£160,000
New LTV	64% (£160k ÷ £250k)

LTV for Different Scenarios

First-Time Buyers

Typical LTV	Deposit
95%	5% (minimum common)
90%	10% (better rates)
85%	15% (improved options)

Home Movers

Situation	LTV Benefit
Equity from sale	Lower LTV on new property
Upsizing	May need higher LTV
Downsizing	Much lower LTV likely

Remortgaging

Opportunity	Why
Property grown in value	LTV drops
Mortgage balance lower	LTV drops
Better rates available	From lower LTV

LTV Thresholds

Key Numbers

Threshold	Significance
95%	Maximum for most lenders
90%	Much better choice than 95%
80%	Sweet spot threshold
75%	Even better rates
60%	Top-tier rates

Getting Below Thresholds

If You’re At	To Get To	Need Extra
85% LTV	80% LTV	5% more deposit
On £200k		£10,000 more
Rate saving	~0.25-0.5%	May be worth it

Example Value

Save Extra	To Improve LTV
£10,000 deposit	85% → 80%
Rate improvement	~0.4%
Monthly saving	~£40
Over 25 years	~£12,000
Return on £10k	Excellent

Reducing Your LTV

At Purchase

Strategy	Effect
Save larger deposit	Lower LTV
Family help	Gifted deposit
Cheaper property	Same deposit = lower LTV

Over Time

Factor	Impact
Mortgage repayments	Reduces loan
Property value growth	Increases value
Overpayments	Faster loan reduction
All improve LTV

Overpaying Example

Scenario	Impact
£200k property, 90% LTV	£180k mortgage
After 2 years normal	£172k balance
After 2 years + £100/m	£168k balance
If property grows 3%/yr	£212k value
Normal payments LTV	81%
With overpaying LTV	79%

Negative LTV / Negative Equity

What It Means

Situation	Calculation
Mortgage	£180,000
Property value	£160,000
LTV	112%
Negative equity	Owe more than value

When This Happens

Cause	Situation
Price falls	Property worth less
High original LTV	Little buffer
Short ownership	Not much paid down

Implications

Issue	Impact
Can’t sell	Without paying difference
Can’t move easily	Trapped
Remortgage hard	Options limited
Time usually helps	Prices often recover

Summary

LTV Level	Meaning
Lower	Better rates, more options
Higher	Fewer options, higher rates
60-75%	Excellent
80-85%	Good
90%+	Expensive

Calculate Yours	Formula
Mortgage	£______
÷ Property value	£______
× 100	= ___% LTV

To Improve LTV	Action
Bigger deposit	If buying
Overpay mortgage	Reduce balance
Wait	Property growth
Remortgage	When LTV drops