Loan-to-value (LTV) explained

Loan-to-value (LTV) is one of the key figures lenders use when deciding how much mortgage finance they're willing to offer. For home buyers, it's also a practical way to understand how much deposit (or equity) you may need, and how that can affect the mortgage options available.

In simple terms, LTV compares the size of the loan to the value of the property.

• Want to work out your own figures? Try our LTV calculator.

What is loan-to-value (LTV)?

LTV is calculated as:

LTV = (mortgage amount ÷ property value) × 100

So, if a property is worth £300,000 and you're borrowing £270,000, your LTV is:

• £270,000 ÷ £300,000 = 0.9
• 0.9 × 100 = 90% LTV

A higher LTV generally means a smaller deposit (or less equity), while a lower LTV usually means a larger deposit (or more equity).

How do you calculate your LTV?

You can work out your LTV using the loan amount and the property value.

Example: deposit-based calculation

If you're buying a home for £250,000 and you have a £50,000 deposit, the mortgage you need is £200,000.

• £200,000 ÷ £250,000 = 0.8
• 0.8 × 100 = 80% LTV

Example: equity-based calculation (home-owner/remortgage)

If you're remortgaging and your property value is £350,000, but your current mortgage balance is £245,000, then your LTV is:

• £245,000 ÷ £350,000 = 0.7
• 0.7 × 100 = 70% LTV

Even if you don't move house, your LTV can reduce as:

• you make mortgage payments (repaying capital)
• the property value changes (depending on the market)

That's why it's useful to keep an eye on LTV during the life of your mortgage, because it may affect what options are available later.

Why does LTV matter for mortgages?

LTV is closely linked to lender risk. If a borrower has a smaller deposit, the lender is taking on a larger loan relative to the property's value.

That's why LTV can influence:

• The range of mortgage products available
• The deposit or equity you may need
• How lenders assess the overall risk of the application

You may also find that lenders price and structure mortgages differently depending on the LTV level.

What affects the LTV you can get?

Your LTV isn't the only factor lenders consider. Even if you have the deposit to target a particular LTV level, lenders will still look at the wider picture.

Common factors that can influence what you can borrow include:

• Credit history
• Income and affordability (including regular outgoings)
• Deposit size and source of funds
• Mortgage fees and other costs
• The property itself (for example, valuation and condition)

A lender may be less comfortable offering higher LTV borrowing if your credit history suggests past repayment issues. In practice, that can mean you may need either a larger deposit (lower LTV) or a different mortgage structure to meet lender expectations.

Typical LTV bands you may hear about

You'll often see mortgages discussed in broad LTV ranges. While exact bands vary by lender and product type, it's common to see groupings such as:

• Up to around 60%
• Around 60% to 80%
• Around 80% to 95%
• Above 95%

If you're planning a purchase or remortgage, it can help to think in terms of which LTV band you're likely to fall into.

High deposits and LTV bands: what counts as a high deposit?

In UK mortgage terms, a "high deposit" is generally anything that pushes your LTV down into a more favourable band.

While definitions vary by lender and product, many borrowers start to notice meaningful differences once their LTV is below around 75%, and especially once it's below around 65%.

A simple way to think about it:

• Higher deposit = lower LTV
• Lower LTV = potentially more lender choice
• Lower LTV = potentially better pricing

Note: A high deposit doesn't automatically guarantee a specific interest rate. Lenders still assess affordability, credit profile and the property you're buying.

Deposit size and mortgage pricing: what to expect

What matters is how your deposit positions you across lender LTV bands:

• Borrowers with larger deposits may be offered products that sit in lower LTV categories.
• Borrowers with smaller deposits may find fewer options and higher costs, depending on the lender and the specific product.

This is one reason two people with the same income and similar property prices can end up with different mortgage outcomes, because their deposit sizes can change the risk profile of the loan.

Will a high deposit reduce your monthly repayments?

Often, yes, because you're borrowing less.

A larger deposit typically means:

• a smaller loan amount
• lower monthly repayments (all else being equal)
• less interest paid over the life of the mortgage

However, your final repayment figure will depend on:

• the interest rate offered
• the mortgage term (e.g., 25 years vs 30 years)
• the repayment type (repayment vs interest-only)

Some lenders have minimum loan size requirements, so the "best" option may depend on how much you're borrowing, not just how much you're putting down.

A strong deposit can improve how lenders view risk, which may widen the range of lenders willing to consider your application. That said, acceptance still depends on the full application, including affordability and credit profile.

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LTV and affordability: how the two work together

Affordability checks look at whether you can make the repayments based on your circumstances. LTV affects the size of the loan, and the size of the loan affects the repayment amount.

So even if a lender could theoretically lend at a higher LTV, they still need to be satisfied that the mortgage is affordable for you.

Factors that can affect affordability include:

• Unstable or fluctuating income
• High existing debt or monthly commitments
• Changes in circumstances (for example, approaching retirement)

A high deposit can be a helpful mitigating factor because it reduces the lender's exposure. That said, lenders still look at the full picture, including employment and income type (PAYE, self-employed, variable income).

The "deposit gap" for first-time buyers

For first-time buyers, saving a deposit often takes years, and the gap between what's needed and what's realistically achievable can feel wider.

First-time buyers often need to borrow a higher percentage of the property value because they don't have a previous home to sell and may have limited equity. That can mean targeting a higher LTV level, which may affect the mortgage options available.

Even where a smaller deposit is possible, the trade-off is often felt in monthly repayments. A lower deposit can mean a higher interest rate on the mortgage, which can increase the cost of borrowing over the term.

In practice, buyers also need to consider that the deposit is only one part of the upfront picture. Legal fees, moving costs and stamp duty (where applicable) can all add to the cash required before completion.

In some cases, first-time buyers may explore alternative ways to increase the effective deposit or equity position, but these arrangements can involve additional complexity and should be considered carefully.

Does your equity affect LTV when buying your next home?

Yes. If you already own property, the equity you have can reduce the LTV on your next purchase.

Equity is the portion of the property value that isn't covered by your mortgage balance. The more equity you have, the more likely you are to be able to borrow at a lower LTV when you move.

Equity can increase over time through:

• Making mortgage repayments
• Overpayments
• Property value growth

When you buy your next home, the purchase price of the new property also matters. If the new home is significantly more expensive, your LTV may not fall as much as you'd expect, even if your equity has improved.

Remortgaging and LTV

When you remortgage, lenders reassess the loan against the current property value. That means your LTV may change since your original mortgage.

If you've built up equity since taking out your current deal, you may be able to improve your LTV position when you remortgage. If your equity is limited, you may be more exposed to higher borrowing costs when your existing rate ends.

This can be especially relevant for households approaching the end of fixed-rate periods taken out during earlier, lower-rate conditions.

A lower LTV can sometimes open up more options, but remortgaging decisions still depend on affordability, the mortgage product you're moving to, and the costs involved.

Lowering your LTV: practical ways it can happen

If you're aiming for a lower LTV, the most direct routes are:

• Saving a larger deposit
• Reducing the amount you need to borrow
• Increasing equity (for example, through overpayments or time)

Even small changes to deposit size can move you into a different LTV level, which may influence the mortgage options you can access.

How to plan your application around LTV bands

1) Aim for the right LTV band

If you're close to a threshold, it can be worth reviewing whether additional savings (or timing your purchase) could move you into a more favourable LTV category.

Even a small change can affect which lenders and products are available.

2) Don't assume the "best" deal is the one you see online

Many advertised rates are based on specific LTVs and borrower profiles. With a high deposit, you may qualify for different pricing, but you'll usually need a proper comparison based on your exact LTV and details.

3) Get your deposit evidence ready

Lenders typically want to see clear documentation for where the deposit comes from and that it's available when needed.

If any portion is gifted, ensure it's structured and evidenced correctly.

4) Check your affordability position

Even with a large deposit, lenders will still assess whether the mortgage payments are affordable based on your income and commitments.

A deposit can reduce the loan size, but it doesn't change the underlying affordability assessment.

5) Balance affordability with timing

Especially if saving more deposit means delaying your purchase, weigh the potential pricing benefit of a lower LTV band against your readiness to buy.

Illustrative 75% LTV first-time buyer products. Rates and eligibility depend on your circumstances and may change.

LTV is only one part of the mortgage picture

LTV helps explain how much you're borrowing relative to the property value, but lenders also consider affordability and overall risk. Your credit history, income, outgoings, and the property valuation can all affect what's possible.

Understanding your LTV can still be useful because it gives you a clearer sense of the deposit (or equity) position you're working with and how that may shape your mortgage options, whether you're buying your first home, moving home, or remortgaging.