What Is Loan-to-Value (LTV)?
Loan-to-value (LTV) is a ratio that expresses the size of your mortgage as a percentage of your property’s value. It is one of the most important metrics in UK mortgage lending, directly influencing the interest rates available to you, the products you can access, and the overall cost of your borrowing.
A lower LTV means you have more equity in your property (or are putting down a larger deposit), which lenders view as lower risk. This is why lower-LTV borrowers are rewarded with better interest rates.
How to Calculate LTV
The formula for loan-to-value is straightforward:
$$\text{LTV} = \frac{\text{Mortgage Amount}}{\text{Property Value}} \times 100$$
Example calculations
Purchasing a property:
- Property price: £300,000
- Deposit: £45,000
- Mortgage amount: £255,000
- LTV: (£255,000 ÷ £300,000) × 100 = 85%
Existing mortgage:
- Current property value: £280,000
- Outstanding mortgage balance: £168,000
- LTV: (£168,000 ÷ £280,000) × 100 = 60%
LTV Bands and Their Impact on Rates
UK mortgage lenders structure their products around LTV bands, typically in 5% increments. Moving into a lower band can mean a meaningfully better interest rate:
| LTV Band | Typical Rate Premium | Product Availability |
|---|---|---|
| 95% | Highest rates (+1.0–1.5% vs best) | Limited; fewer lenders |
| 90% | High rates (+0.5–1.0% vs best) | Good range of products |
| 85% | Moderate premium (+0.3–0.6%) | Wide product choice |
| 80% | Competitive rates (+0.1–0.3%) | Excellent choice |
| 75% | Very competitive rates | Most best-buy deals |
| 60% | Best available rates | Full product range |
Premiums are illustrative and vary by lender and market conditions.
The biggest improvements in available rates typically occur when moving from 95% to 90% and from 90% to 85% LTV. If you are close to a band threshold, it may be worth saving a little more for your deposit or making overpayments to cross into the next band before remortgaging.
See our mortgage deposit calculator to understand how your deposit translates into LTV.
How LTV Changes Over Time
Your LTV is not fixed — it changes as two things happen:
1. Mortgage repayments reduce the loan
Each monthly payment on a repayment mortgage reduces your outstanding balance. Over the first five years of a £200,000 mortgage at 4.5% over 25 years, you would repay approximately £22,000 of capital, reducing your balance to around £178,000.
On an interest-only mortgage, the balance stays the same because your payments only cover the interest. Your LTV only changes if the property value moves.
2. Property value changes
If your property increases in value, your LTV improves even without additional repayments. Conversely, if property values fall, your LTV increases — potentially pushing you into a less favourable band.
Combined example
Starting position:
- Property value: £250,000
- Mortgage: £225,000
- LTV: 90%
After 5 years (assuming 2% annual property growth and normal repayments at 4.5%):
- Property value: ~£276,000
- Mortgage balance: ~£200,000
- New LTV: 72%
This dramatic improvement — from 90% to 72% — illustrates why your remortgage deal is often significantly better than your initial purchase mortgage.
Remortgaging and LTV
When your initial mortgage deal ends (typically after 2–5 years), you will normally move to your lender’s standard variable rate (SVR), which is usually much higher. Remortgaging to a new deal is almost always worthwhile.
At this point, your improved LTV can unlock considerably better rates:
- Check your current LTV — Use our calculator with your current balance and an up-to-date property valuation.
- Consider overpaying — If you are close to the next LTV band, making overpayments before remortgaging could save you a significant amount.
- Get a professional valuation — Your lender will arrange a valuation as part of the remortgage process. If you believe your property has increased substantially in value, this can work in your favour.
- Compare the whole market — Use a mortgage broker to ensure you are getting the best rate for your LTV band. Our mortgage calculator can help you estimate payments on potential new deals.
Negative Equity
If your property value falls below your outstanding mortgage balance, you are in negative equity — meaning your LTV exceeds 100%. This can happen during property market downturns and makes it very difficult to remortgage or sell without making up the shortfall. Maintaining a healthy LTV through regular repayments and overpayments provides a buffer against this risk.