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What is Loan to Value Ratio?

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Before you apply for a mortgage, you’ll need to know your loan to value ratio. Find out what LTV means for you and how to work it out with our guide.   

What is loan to value ratio (LTV)?

Loan to value – or LTV – is the ratio of the value of the home you want to buy and the loan you’ll need to buy it, shown as a percentage.

Having a good LTV can lower the interest rates offered to you and mean you have more equity in your home.

A higher LTV is a greater risk to lenders if the property market drops. This is because your existing mortgage could exceed the value of your home, resulting in a loss for the lender and puts you in a negative equity position.

Find out how to work out your loan to value ratio and what LTV means for your mortgage with this guide. 

How to work out LTV

The easiest way to work out your loan to value ratio is to take away your deposit amount from the value of the house, then work out the difference as a percentage.

For example, if your house is valued at £250,000 and you have a deposit of £50,000, you would need a mortgage of £200,000.

 

To calculate your LTV ratio:

200,000 ÷ 250,000 = 0.8

0.8 x 100 = 80%

This gives you an 80% loan to value ratio.

 

The larger your deposit, the lower your LTV. Think about how much you can afford upfront before applying for a mortgage. 

LTV calculator

To work out your Loan to Value ratio and see how much you could borrow, use our handy mortgage calculator.

It’s simple to use – enter your:

  • Home’s estimated value
  • Deposit size
  • Loan term 

You can also use this tool to get an estimate of your monthly repayments.

What does LTV ratio mean for your mortgage?

If you have what is considered a high LTV ratio, you may only be offered a higher interest rate on your mortgage deal.

A low LTV ratio could mean you are eligible for lower monthly mortgage repayments as the rates are likely to be lower. 

How to change your LTV?

The best way to raise your LTV ratio is to put down a bigger deposit on your home. This may mean waiting to buy a home until you can save a bit more money.

Other ways to get a lower LTV ratio include:

Buy a less expensive house

Finding a house with a lower asking price will reduce your LTV. This could be fewer bedrooms or looking in an area where house prices are lower.

Look for help

If you’re a first time buyer or wanting to own a share of the home, you could benefit from the government’s Shared Ownership schemes.

The content on this page is for reference and does not constitute finance advice.

For impartial financial advice, we recommend government bodies like the Money Advice Service.

Calculators & tools

We have a range of mortgage calculators to help you:

  • Find out how much you could borrow from Lloyds Bank
  • See how much you could save if you make overpayments on your mortgage
  • Get an idea how a change to the Bank of England Base Rate could effect your monthly payments

Use our calculators and tools >

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You can talk to us over the phone or use our mortgage video service from the comfort of your own home.

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