What Is Loan-to-Value? A mortgage divides a property’s value into two parts.

One part belongs to you through your deposit or accumulated equity. The other part is financed through the mortgage.

Loan-to-value measures the relationship between those two amounts.

At a Glance

Loan-to-value, usually called LTV, shows how much you are borrowing compared with the property’s value.

To calculate it, divide the mortgage amount by the property value. Then multiply the result by 100.

For example, a £180,000 mortgage against a £200,000 property produces a 90% LTV.

A lower LTV may give access to more mortgage options or different rates. However, approval still depends on affordability, credit history, property acceptability and lender criteria.

What Is Loan-to-Value?

Loan-to-value is the mortgage balance expressed as a percentage of the property’s assessed value.

Lenders use LTV to understand how much of the property is being financed and how much equity supports the borrowing.

The calculation is:

Mortgage amount ÷ property value × 100 = LTV percentage

For example:

£180,000 ÷ £200,000 × 100 = 90% LTV

The remaining 10% represents the buyer’s deposit at the point of purchase.

LTV does not show whether the mortgage is affordable. It measures the relationship between the loan and the property value.

How to Calculate Loan-to-Value

You need two figures:

• The mortgage amount.
• The property value accepted by the lender.

Divide the mortgage amount by the property value. Multiply the answer by 100.

The same calculation can be used when buying, moving home or reviewing an existing mortgage.

You can also use our residential affordability calculator to consider borrowing alongside your income and regular commitments.

Why Does LTV Matter to Mortgage Lenders?

A mortgage is secured against the property. Therefore, lenders consider whether the property provides sufficient security for the amount borrowed.

A higher LTV means the mortgage represents a larger share of the property value.

A lower LTV means the borrower has provided a larger deposit or built more equity.

LTV may influence:

• Which mortgage products are available.
• The interest rates attached to those products.
• The deposit required.
• The lender’s property criteria.
• The level of underwriting applied.
• Whether further borrowing may be considered.
• Remortgage options.

LTV is only one part of the assessment.

A lender may also review income, expenditure, credit history, employment, deposit source and the property itself.

How Does Your Deposit Affect LTV?

Your deposit reduces the amount you need to borrow.

For example, consider a property priced at £250,000.

A £12,500 deposit leaves a £237,500 mortgage. That produces a 95% LTV.

A £25,000 deposit leaves a £225,000 mortgage. That produces a 90% LTV.

A £50,000 deposit leaves a £200,000 mortgage. That produces an 80% LTV.

A larger deposit can reduce LTV. This may provide access to different mortgage products, subject to the lender’s criteria.

However, using every available pound for the deposit may not always be practical. Buyers may also need money for legal work, surveys, moving costs, repairs and emergencies.

The strongest deposit is not simply the largest possible amount. It is one that supports the mortgage while leaving the household financially prepared.

First-time buyers can read our first-time buyer mortgage guide for further information about deposits and mortgage preparation.

Does the Purchase Price Always Determine LTV?

Not necessarily.

The lender usually arranges a mortgage valuation to assess the property for lending purposes.

When the lender’s valuation is lower than the agreed purchase price, it may calculate LTV using the lower valuation.

For example:

• Agreed purchase price: £300,000
• Proposed mortgage: £270,000
• Expected LTV: 90%
• Lender valuation: £285,000
• Revised LTV: approximately 94.7%

The lower valuation increases the measured LTV. The lender may then reduce the available loan, change the product or request a larger deposit.

Our guide to the mortgage valuation process explains what lenders check and why their valuation may affect the application.

What Is a Good Loan-to-Value Ratio?

There is no single LTV that is right for every borrower.

A lower LTV may provide access to more options because the mortgage represents a smaller proportion of the property value.

However, the lowest possible LTV is not always the only financial objective.

A buyer may need to balance:

• Deposit size.
• Available savings.
• Monthly repayments.
• Moving costs.
• Emergency reserves.
• Planned property improvements.
• Future financial commitments.

A 75% LTV mortgage is not automatically suitable because it has a lower percentage. The mortgage must still be affordable and appropriate for the borrower’s plans.

Mortgage product bands also differ between lenders. Moving below a particular percentage may affect product availability, but it does not guarantee a lower rate or approval.

What Does 100% LTV Mean?

A 100% LTV mortgage covers the full property purchase price, so the borrower does not provide a conventional cash deposit.

These mortgages are sometimes called no-deposit mortgages.

Eligibility can be restricted. Lenders may apply detailed rules concerning income, credit history, property type and affordability.

Borrowing the entire property value also leaves little initial equity. If the property value falls, the borrower could owe more than the home is worth.

Read our no-deposit mortgage guide for a technical explanation of 100% LTV lending and its risks.

How Is LTV Calculated When Remortgaging?

For a remortgage, LTV compares the outstanding mortgage balance with the property’s current assessed value.

Suppose:

• Current mortgage balance: £210,000
• Current property value: £300,000

The calculation is:

£210,000 ÷ £300,000 × 100 = 70% LTV

The homeowner has approximately 30% equity before allowing for selling costs or other secured borrowing.

The lender may use an automated valuation, a desktop valuation, or a physical inspection. The chosen method depends on the lender and property.

A higher valuation could reduce the calculated LTV. A lower valuation could increase it.

Homeowners approaching the end of a mortgage deal can review our remortgage advice guide before deciding whether to switch lender or remain with their current provider.

How Can LTV Change Over Time?

LTV is not permanently fixed at the percentage recorded when the mortgage begins.

It can change through:

• Capital mortgage repayments.
• Mortgage overpayments.
• Changes in property value.
• Additional secured borrowing.
• Interest added to the loan.
• Releasing equity from the property.

On a repayment mortgage, regular payments usually reduce the capital balance over time.

When the property value remains stable, this can gradually reduce LTV.

If the property value increases, the LTV may fall more quickly. However, property values can also decrease.

Interest-only mortgages work differently because regular payments may not reduce the capital balance.

What Is Negative Equity?

Negative equity occurs when the total borrowing secured against a property exceeds its current value.

For example:

• Mortgage balance: £205,000
• Property value: £195,000

The property has approximately £10,000 of negative equity.

This position may restrict remortgage or moving-home options because selling the property would not automatically repay the full mortgage balance.

Negative equity does not always create an immediate issue when repayments remain affordable and the owner is staying in the property.

However, it becomes particularly important when the borrower needs to sell, refinance or change the mortgage.

Can Home Improvements Reduce LTV?

Home improvements may increase a property’s value, but the cost of the work does not guarantee an equal increase.

A £30,000 renovation will not necessarily add £30,000 to the lender’s valuation.

Valuers may consider:

• Local comparable properties.
• Property size.
• Structural condition.
• Quality of the work.
• Planning permission.
• Building regulation approval.
• Local buyer demand.
• Whether the improvements suit the area.

The revised LTV will depend on the value accepted by the lender, not solely on the amount spent.

Does LTV Affect Bad Credit Mortgage Applications?

LTV can be particularly relevant when an applicant has previous credit problems.

A larger deposit may reduce lender exposure. However, it does not remove the credit issue or guarantee acceptance.

Lenders may examine:

• The type of credit problem.
• When it occurred.
• The amount involved.
• Whether it has been settled.
• The reason it occurred.
• The applicant’s recent payment record.
• Current affordability.

Our bad credit mortgage guide explains how deposits, credit history and lender criteria can interact.

LTV Is Not the Same as Mortgage Affordability

LTV measures the mortgage against the property value.

Affordability assesses whether the borrower can maintain the repayments.

A borrower could have a large deposit and low LTV but still fail an affordability assessment.

Another borrower could have a higher LTV but sufficient income to pass affordability checks.

Lenders may review:

• Basic income.
• Overtime, commission or bonuses.
• Self-employed income.
• Credit commitments.
• Childcare costs.
• Household expenditure.
• Mortgage term.
• Interest-rate stress testing.

The Connect Lifetime mortgage calculator can provide an initial repayment estimate. It does not confirm how much a lender will offer.

How to Prepare Before Discussing Your LTV

Gather accurate information before comparing mortgage options.

You may need:

• The property purchase price.
• Your available deposit.
• The source of the deposit.
• Your current mortgage balance.
• Details of other secured loans.
• A realistic property value.
• Your income and expenditure.
• Details of early repayment charges.
• An estimate of buying or remortgaging costs.

Avoid estimating your LTV from an optimistic property valuation.

A lender may reach a different figure, which could affect the products available.

Speak to a Mortgage Adviser

Loan-to-value gives structure to a mortgage decision.

It shows how much is being borrowed, how much equity supports the loan and how changes in value could affect future options.

However, the percentage does not decide the application alone.

Connect Mortgages can review your deposit, property, income, credit position and borrowing plans. An adviser can then explain which mortgage options may fit your circumstances.

Mortgage availability remains subject to affordability, underwriting, valuation and lender criteria.

Frequently Asked Questions About Loan-to-Value

What does LTV mean?

LTV means loan-to-value. It shows the mortgage amount as a percentage of the property’s assessed value.

How do I calculate mortgage LTV?

Divide the mortgage amount by the property value. Multiply the result by 100.

For example, a £225,000 mortgage against a £250,000 property produces a 90% LTV.

Is a lower LTV better?

A lower LTV may provide access to more mortgage products or different rates. However, suitability still depends on affordability and lender criteria.

Does a larger deposit reduce LTV?

Yes. A larger deposit reduces the mortgage amount required, which lowers the LTV when the property value remains unchanged.

Can a lender’s valuation change my LTV?

Yes. A lower-than-expected valuation can increase LTV because the mortgage is measured against a smaller property value.

What LTV can a first-time buyer get?

Available LTV limits depend on the lender, mortgage product, affordability, credit history and property. Some products may permit a small deposit or no conventional deposit.

How does LTV work when remortgaging?

The outstanding mortgage is divided by the lender’s current property valuation. The result is multiplied by 100.

Does overpaying a mortgage reduce LTV?

Overpayments can reduce the mortgage balance. When the property value remains stable, this reduces LTV.

Check any overpayment restrictions or early repayment charges before paying extra.

Can my LTV increase?

Yes. LTV may rise when the property value falls, interest is added, further borrowing is secured or the mortgage balance does not reduce.

Does a low LTV guarantee mortgage approval?

No. Lenders also assess affordability, credit history, income, expenditure, property suitability and other lending criteria.

Your home may be repossessed if you do not keep up repayments on your mortgage.