Published: October 4, 2025

What is Loan-to-Value (LTV)?

By Donna Puncher CeMAP

Introduction

When you start comparing mortgage products, one term you’ll see repeatedly is Loan-to-Value, or LTV.
This simple percentage plays a major role in determining how much you can borrow and what interest rate you’ll pay.

Understanding how LTV works will help you plan your deposit, assess your affordability, and choose the most cost-effective mortgage deal.

1. What LTV Means

Loan-to-Value (LTV) expresses the proportion of your property’s value that you’re borrowing as a mortgage.

It’s calculated as:

(Mortgage Amount ÷ Property Value) × 100

Example:
If you buy a home worth £300,000 with a £30,000 deposit, you’ll need to borrow £270,000.
That means your LTV is 90%.

2. Why LTV Matters

Lenders use LTV to gauge risk.
A lower LTV means you’re borrowing less compared to the property’s value — which reduces the lender’s exposure.

Borrowers with lower LTVs are rewarded with:

• Lower interest rates
• Wider choice of lenders
• Greater chance of approval

3. Common LTV Bands

Most lenders offer mortgage products in set LTV ranges, such as:

• 95% LTV – for buyers with a 5% deposit (often higher interest rates)
• 90% LTV – typical for many first time buyers
• 85% or 80% LTV – more competitive rates and greater choice
• 60–70% LTV – excellent rates, often available for remortgages

The lower your LTV, the more options you’ll generally have.

4. Improving Your LTV

If your current LTV is high, you can reduce it by:

• Increasing your deposit before applying
• Looking at slightly lower-priced properties
• Reducing other debt to improve affordability
• Waiting for property values to rise (for remortgagers)

Even a small change — from 90% to 85% — can unlock far better interest rates.

5. LTV and Interest Rates

Mortgage rates are largely tiered by LTV bands.
A borrower with an 80% LTV might pay 1–1.5% less in interest than someone borrowing at 95%.

That difference can add up to thousands of pounds over the life of the loan.

6. LTV and Remortgaging

When remortgaging, if your property’s value has increased or your mortgage balance has reduced, your LTV may have improved.

👉 This is why many homeowners can access cheaper rates when they remortgage after a few years.

Summary

Your LTV is a key figure in every mortgage conversation.
By understanding how it works, you can plan your deposit and borrowing strategy with confidence — and make informed decisions when choosing your mortgage.

To discover what your LTV would be on your new fist time buyer mortgage in southend click here

What can I afford?