What is loan-to-value?

Your loan-to-value (LTV) ratio is the amount of money you borrow on a mortgage compared to the value of the property. It’s usually shown as a percentage. For example, an 80% loan-to-value mortgage means you’re borrowing 80% of what the property is worth.

The headlines

  • Loan-to-value ratio is one of the main factors that decides what mortgage rate you can apply for.
  • If you have a high LTV, you might get a higher interest rate on your mortgage deal, which could mean higher monthly repayments.
  • If you have a low LTV ratio, you might get a lower mortgage rate and lower monthly mortgage repayments.

In this guide

Why is LTV ratio important?

How to work out your LTV ratio

What is a good LTV ratio?

How to improve your LTV ratio

Frequently asked questions

Why is LTV ratio important?

Product choice

If your LTV is too high, there may be fewer products you could apply for. 

How much you could borrow

LTV can limit how much you’re able to borrow. For example, if a lender offers up to 95% of a property’s value, the maximum loan would be £190,000 on a £200,000 home.

Your mortgage rate

Your LTV determines which rates you can apply for. Lenders typically offer better rates at lower LTVs.

How to work out your loan-to-value ratio

The easiest way to work out your LTV ratio is to:

  1. divide your mortgage amount by the value of the property
  2. multiply it by 100 to get your LTV percentage. 

In other words (mortgage amount ÷ property value) x 100 = LTV

This is known as the loan-to-value formula.

The larger your deposit or equityEquity in a house is the value of the property that you truly own outright, after any outstanding mortgage or loans secured against it are subtracted from the current market value. Over time, as you repay your mortgage and if the property value increases, your equity should rise., the lower your LTV. 

Here’s an example

Say you’re buying a house worth £250,000 and you have a £50,000 deposit. 

This means your mortgage amount would be £200,000.

You can then work out your LTV:

(200,000 ÷ 250,000) x 100 = 0.8 x 100 = 80%

This gives you an 80% loan-to-value ratio.

Want to work out the LTV on your current mortgage?

If you already have a mortgage, you can use the same formula to work out your LTV. But first, you’ll need to find out how much you have left to repay on your mortgage compared to your latest house valuation.

For example:​

Amount left to pay on your mortgage: £175,000​

House valuation: £350,000​

(£175,000 ÷ £350,000) x 100 = 0.5 x 100 = 50%

This gives you a 50% loan-to-value ratio on your current mortgage.

What is a good loan-to-value ratio?

A good LTV ratio depends on your circumstances. If you can afford your repayments, you can feel confident borrowing at the level that works for you.

Lower LTVs usually have access to better rates and a wider range of mortgage deals. 

If you can put down a larger deposit or build more equityRegular mortgage payments reduce your loan balance, increasing equity. Additional lump-sum payments towards your mortgage and reducing your mortgage term can build equity faster. Home improvements, renovations, and property market conditions can also increase your equity. But, a drop in property market values can lower equity., it could reduce your monthly costs. 

How to improve your LTV ratio​

Save a bigger deposit

If you’re close to a lower LTV band, it may be worth saving a little more for your deposit to access better rates. 

Buy a cheaper home

Finding a house with a lower asking price could help reduce your LTV. This might mean buying a house with fewer bedrooms or searching in areas where house prices are lower.

Look for help

If you’re a first-time buyer or want to own a share of a home, you could benefit from the government’s shared ownership scheme. With a shared ownership property, the LTV is based on the share of the property you buy, not the value of the property.

Find out how to get onto the property ladder if you’re a first-time buyer.

Reduce your mortgage balance

By making regular or lump sum overpayments, you’ll pay off your mortgage quicker and lower your LTV. Make sure you check if your mortgage deal has overpayment limits or early repayment charges.

Increase your property value

Some home improvements can increase how much your property is worth and help you get a lower LTV.

LTV calculator

We can help you get an estimate of your monthly repayments with our mortgage calculator. The tool will also show how much you can potentially borrow and calculate your LTV ratio.

You could lose your home if you don’t keep up your mortgage repayments

Let's look at the details

  • First-time buyers might be able to take out a mortgage with a 95% LTV. This is known as a 95% mortgage or a 5% deposit mortgage. 

    We also have a £5k deposit mortgage, which has a maximum LTV of 98%.

    While this could make it easier to get on the property ladder, the higher loan-to-value ratio could mean higher rates and monthly payments. So, you might prefer to continue saving for a bigger deposit.

  • The maximum loan-to-value ratio on a mortgage can vary between lenders. For example, at Lloyds we offer a maximum loan-to-value of 98% with our £5k deposit mortgage.

    The higher your LTV ratio, the higher your mortgage rate is likely to be. 

  • Mortgage lenders often split their mortgages into LTV brackets, also known as loan-to-value bands. These bands often go up in increments of 5%, but this might vary. 

    The mortgage rate you’re offered depends on the band you’re in. Lower LTV bands usually give you access to better rates. 

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