What does loan-to-value (LTV) mean on a mortgage?

Full answer

Loan-to-value (LTV) is the ratio of your mortgage amount to the value of the property, shown as a percentage. The formula is mortgage divided by property value, times 100. If you buy a GBP 250,000 house with a GBP 50,000 deposit, you borrow GBP 200,000, so your LTV is 200,000 / 250,000 = 80%. Your deposit covers the remaining 20% of equity. LTV matters because it is the main driver of the interest rate you are offered. Lenders price risk in bands, and you cross into a cheaper band as your LTV falls. Common tiers are 95%, 90%, 85%, 80%, 75% and 60%. A borrower at 75% LTV will typically get a noticeably lower rate than one at 90%, because the lender has a larger equity cushion if house prices fall and the property is repossessed. LTV affects three groups in particular. First-time buyers usually start at high LTVs (90-95%) because deposits are hard to build. Home movers often have more equity and land in lower bands. Remortgagers can drop a band over time as they repay capital and as the property value rises, unlocking a better rate. A worked example: you owe GBP 152,000 on a home now worth GBP 200,000. Your LTV is 76%. Paying down an extra GBP 2,000, or a modest rise in value, could push you under 75% and into the next rate band at your next remortgage. Two points for 2026/27. Lenders revalue the property when you remortgage, so a rising market can cut your LTV without you overpaying. And LTV is separate from affordability checks and stamp duty, which are assessed on their own rules. Use the mortgage calculator to model how different deposits change your LTV, monthly payment and total interest.

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