What Is Loan-to-Value (LTV)? Simple Explanation
Your LTV ratio shapes the mortgage deal you are offered. Here is what it means, how to work yours out, and how to bring it down.
One number sits behind almost every UK mortgage decision: your loan-to-value ratio, or LTV for short. It follows you whether you are a first-time buyer pulling a deposit together or a homeowner ready to remortgage onto a cheaper deal, and it matters just as much for a buy-to-let investor adding to a portfolio. When a lender weighs up whether to approve you and what interest rate to set, your LTV does much of the talking. It also shapes how much they are willing to lend. Plenty of buyers never give it a thought, yet getting it wrong can add thousands of pounds to the cost of your mortgage over the years.
Your LTV is the share of a property’s value that you borrow, written as a percentage. When you are buying, your deposit makes up the difference; when you are remortgaging, the equity you already hold does the same job. Borrow a bigger slice of the value and your LTV goes up, which the lender reads as more risk. That risk lands back on you as a higher rate and a smaller pool of products. Borrow less against the value and your LTV drops, the lender sees you have more of your own money on the line, and the better deals open up.
Below you will find what LTV actually means, the formula behind it, and a worked example you can follow with your own figures. We also look at the LTV bands lenders use to price their deals and the practical ways to bring your ratio down, whether that is saving a larger deposit or overpaying a mortgage you already have. There is an LTV calculator on this page as well, so you can check where you stand before you speak to a broker.
What does loan-to-value mean?
The "loan" is the mortgage you take out. The "value" is what the property is worth, either the price you are paying or its current market value if you already own it. Loan-to-value measures one against the other: how much you are borrowing set against what the property is worth. The answer comes out as a percentage.
The "loan" is the mortgage you take out. The "value" is what the property is worth, either the price you are paying or its current market value if you already own it. Loan-to-value measures one against the other: how much you are borrowing set against what the property is worth. The answer comes out as a percentage. Getting a handle on your LTV matters most for first-time buyers trying to work out how big a deposit they need.
The lower your LTV, the more of your home you own outright, and lenders tend to reward that with sharper rates.
How to calculate your LTV
Our LTV calculator works your ratio out in a few seconds. Pop in the property value and the amount you plan to borrow, which is the value minus your deposit or equity. It returns your LTV as a percentage and shows which rate band that puts you in.
The tool bases your loan-to-value (the size of your mortgage against the property’s worth) on three things: the property value, your deposit or equity, and the amount you are borrowing.
Our LTV calculator works your ratio out in a few seconds. Pop in the property value and the amount you plan to borrow, which is the value minus your deposit or equity. It returns your LTV as a percentage and shows which rate band that puts you in.
Example loan-to-value ratio
Say you buy a home for £100,000 with a £25,000 deposit. You would need a £75,000 mortgage to cover the rest. That £25,000 you put down is your equity, the part of the property you own outright, and it leaves you with an LTV of 75%.
The formula is loan divided by property value, multiplied by 100. Run the example through it: £75,000 ÷ £100,000 × 100 = 75, so the LTV is 75%.
Say you buy a home for £100,000 with a £25,000 deposit. You would need a £75,000 mortgage to cover the rest. That £25,000 you put down is your equity, the part you own outright, and it leaves you with an LTV of 75%. Run your own numbers through our LTV calculator to see your ratio right away.
The formula is loan divided by property value, multiplied by 100. For the example above that is £75,000 ÷ £100,000 × 100 = 75, so the LTV is 75%. Our repayment calculator then shows how different LTV levels feed through to your monthly payments.
Quick maths
Deposit ÷ Property Value × 100 gives you your equity percentage. Subtract that from 100 to get your LTV.
Why is LTV important?
Your LTV has a direct hand in the mortgage deal you end up with. As a rule, the less you need to borrow against the property’s value, the better the interest rate a lender will offer.
A lower LTV gives the lender a cushion if house prices drop. Borrow at a high LTV and, should the property’s value fall below what you owe, the lender stands to lose more if you cannot keep up the payments. That extra exposure is why a higher LTV usually comes with a higher rate.
Your LTV has a direct hand in the mortgage deal you end up with. As a rule, the less you need to borrow against the property’s value, the better the interest rate a lender will offer.
A lower LTV gives the lender a cushion if house prices drop. Borrow at a high LTV and, should the property’s value fall below what you owe, the lender stands to lose more if you cannot keep up the payments. That extra exposure is why a higher LTV usually comes with higher interest rates.
Key LTV thresholds
Lenders tend to price in bands, commonly at 60%, 75%, 80%, 85%, 90% and 95%. Slip into the band below, even by a single percentage point, and you can pick up better rates and a wider set of products.
Low LTV vs High LTV
| Low LTV (≤75%) | High LTV (90%+) |
|---|---|
| Access to the best interest rates | Higher interest rates |
| Wider range of mortgage products | Fewer lenders and products |
| Lower monthly repayments | Risk of negative equity |
| More equity buffer if prices fall | May require mortgage insurance |
Preferable loan-to-value ratios
The sharpest rates usually sit below 80% LTV. That does not shut the door above it: mortgages exist at 90% and 95% LTV, and there are even no-deposit deals. They just count as high-LTV lending, so the rate tends to be higher to account for the added risk.
The sharpest mortgage rates usually sit below 80% LTV. That does not shut the door above it: mortgages exist at 90% and 95% LTV, and there are even no-deposit deals. They just count as high-LTV lending, so the rate tends to be higher to account for the added risk. Our guide to saving for a deposit has tips for reaching a lower LTV band.
Typical LTV bands
Decisions that could affect your LTV
How low you can push your LTV comes down to your own situation: what you earn and have saved, the property you have your eye on, and how soon you need to move. Some buyers would rather pay a bit more over the years and get on the ladder sooner with a smaller deposit, and that is a fair trade to make.
If you would rather bring your LTV down to reach better rates, here are a few routes worth weighing up:
How low you can push your LTV comes down to your own situation: what you earn and have saved, the property you have your eye on, and how soon you need to move. Some buyers would rather pay a bit more over the years and get on the ladder sooner with a smaller deposit. Our borrowing calculator shows how much you could borrow at different deposit levels.
If you would rather bring your LTV down to reach better rates, here are a few routes worth weighing up:
Consider a cheaper property
- If the home you want tips you into a higher LTV band, trimming your budget a little can move you into a better band and cut your costs over the long run.
Save a larger deposit
- A bigger deposit puts more equity in from day one and drags your LTV down. If building it up will take a while, weigh that wait against the chance that house prices climb in the meantime.
Type of mortgage
- On a repayment mortgage you chip away at the loan every month, so your equity builds and your LTV falls as the years pass. Where your lender allows overpayments, those speed the process up.
Invest in your property
- Work that lifts the property’s value can pull your LTV down, since you owe the same against a home worth more. The same thing happens on its own in areas where prices are climbing fast, such as places going through regeneration.
Work with a mortgage broker
- A specialist adviser can talk you through how LTV plays out in your case, point you to the lenders most willing to be flexible, and track down the deals that fit.
Related guides
- First-Time Buyer Guide
Deposits, government schemes, and what actually happens at each stage of buying your first home.
- How Much Can I Borrow?
How income multiples and affordability checks work, and what moves your maximum borrowing up or down.
- Mortgage Rates Explained
How fixed, variable and tracker rates differ, and how to tell which one suits your plans.
- Deposit Guide for First-Time Buyers
How to pin down the deposit you actually need, plus practical ways to build it up faster.
Frequently asked questions
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- FCA register
- Updated
- 24 February 2026
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