What loan to value means
Loan to value, or LTV, is the size of your mortgage set against the value of the property, shown as a percentage. It is the single number a lender looks at first, because it tells them how much of the home is covered by borrowing and how much by your own money. The rest, the part you are not borrowing, is your equity. A 90% LTV means the mortgage covers 90% of the property and you hold 10% in equity.
The formula is short: LTV = loan ÷ property value × 100. Borrow £240,000 against a £300,000 home and your LTV is 80%. Your deposit or equity is the other £60,000, which is 20%. A lower LTV means you are borrowing less against the property, so lenders treat you as lower risk and offer better rates.
Why your LTV band matters
Lenders do not price every LTV differently. They group mortgages into bands and set a rate for each one. The common thresholds are 95%, 90%, 85%, 80%, 75% and 60%, and the rate steps down each time you cross one going lower. This is why a deposit that pushes you from 81% to 79% can matter more than the two points suggest: it moves you into a cheaper band.
- 60% and under: the cheapest rates and the widest choice of lenders.
- 75% to 80%: still a strong position, with plenty of competitive deals.
- 85% to 90%: mainstream and widely available, but rates rise against the lower bands.
- 90% to 95%: fewer lenders and higher rates. This is the top of the standard market for most buyers.
- Above 95%: a small pool of lenders and the highest rates, sometimes needing a guarantor or a scheme.
How to lower your LTV
You have two levers: borrow less or hold more value. A bigger deposit cuts the loan against the same price. If you already own the home, every mortgage payment reduces the balance, so your LTV falls over time. Rising property prices help too, because LTV is worked out on the current value. When you remortgage, a home that has gone up in value can drop you into a cheaper band without you adding a penny of cash.
How to use this calculator
- Enter the property value: the price you are paying, or the current value if you already own it.
- Choose whether to enter your deposit or your loan amount. The calculator derives the other one.
- Read your LTV per cent at the top, with the loan-versus-equity bar underneath.
- Check the rate band you fall in, and how much more off the loan would reach the next cheaper threshold.
Frequently asked questions
How do I calculate my loan to value?
Divide your mortgage amount by the value of the property, then multiply by 100. For example, a £240,000 mortgage on a £300,000 property is 240,000 ÷ 300,000 = 0.8, which is an 80% LTV. Your deposit or equity makes up the rest, so at 80% LTV you hold 20% in equity. The calculator above does this for you: enter the property value and either your deposit or your loan, and it works out the LTV, your equity in pounds and per cent, and the rate band you fall in.
What is a good loan to value ratio?
A lower LTV is better, because it means you are borrowing less against the property and lenders see you as lower risk. As a rough guide, 60% or under gives you the cheapest rates and the widest choice, 75% to 80% is still a strong position, and 90% is the top of the mainstream market for most buyers. An LTV of 40% or 25% is excellent: you own most of the property outright, so you qualify for the best deals available. Above 90% the number of lenders falls and rates rise, and above 95% the choice narrows further.
How does LTV affect my mortgage rate?
Lenders price mortgages in LTV bands, and the rate steps down each time you cross a threshold. The common tiers are 95%, 90%, 85%, 80%, 75% and 60%. Sitting just above a threshold, say at 76%, means a slightly higher rate than at 75%, so a small increase in your deposit can move you into a cheaper band. The biggest savings usually come from dropping under 90%, 85% and 80%. Below 60% the rate improvements level off.
How can I lower my LTV?
There are two ways. Put in a larger deposit, which reduces the loan against the same value, or increase the property value, either by waiting for prices to rise or by improvements that add value. If you already own the home, paying down the mortgage lowers the loan, and each repayment nudges your LTV down over time. When you remortgage, your LTV is based on the current property value and the remaining balance, so a home that has gone up in value can drop you into a cheaper band without you adding any cash.
What LTV do I need to remortgage?
Most lenders will remortgage up to 90% LTV, and some up to 95%, but you get the best rates at 75% LTV or lower. Because a remortgage uses your property's current value rather than the price you first paid, rising prices and the balance you have already paid off often leave you at a lower LTV than when you took out the original mortgage. Work out your current LTV with the calculator above using today's value and your outstanding balance.
What happens if my LTV is above 95%?
A handful of lenders offer mortgages above 95% LTV, but the choice is small and the rates are the highest on the market. You may need a guarantor, a family-backed deal or a government scheme to borrow at that level. The practical fix is a larger deposit: even a few thousand pounds more can bring you under 95%, which opens up more lenders and lower rates.
This tool is a guide, not financial advice. Lender bands and rates vary and change over time.
