Loan-to-value (LTV) calculator

What is loan-to-value?

Loan-to-value (LTV) is the ratio of your mortgage against the value of your property. It's a percentage figure that reflects the proportion of your property that is mortgaged and the amount that you own (usually called your equity).

For example, if you own 25% of your house and have a mortgage to cover the remaining amount, your loan-to-value is 75%.

Loan-to-value is a key consideration when you come to buy or sell your property, remortgage or release equity.

How to calculate LTV on a mortgage

To calculate your LTV ratio, divide the value of your mortgage by the value of your property (or the one you want to buy). Then multiply this answer by 100 to get the final percentage figure.

If you’re not sure how much your mortgage would be, subtract the deposit or equity you have from the property’s total value. For example, if you want to buy a house with a value of £250,000 and you have a deposit or equity of £100,000, you will need a mortgage of £150,000.

Below is the LTV calculation if your mortgage is £150,000 and the property’s value is £250,000.

£150,000 / £250,000 = 0.6

0.6 x 100 = 60

LTV = 60%.

The table below shows some more LTV examples on a property worth £250,000.

But, instead of calculating your LTV manually, you can use our calculator above to work out your loan-to-value. You simply need to input the amount you need to borrow and the amount your property is worth.

When you know your LTV, you can then compare mortgage rates.

Does loan-to-value affect mortgage interest rates?

Loan-to-value (LTV) is one of the main factors that influences mortgage rates. The lower your LTV, the more likely you are to qualify for cheaper deals as lenders view someone who owns a substantial amount of equity in their property as a lower risk.

By contrast, those who own less equity and need a larger mortgage are typically viewed as a higher risk as there’s more chance of falling into negative equity (when you owe more than your property is worth) if house prices drop. As a result, these borrowers will often be charged higher interest rates.

If you default on your mortgage and the lender needs to recover the debt by selling the property, they want some certainty that they can get their money back. For example, at 60% LTV, house prices have to drop by 40% before the lender will lose money, compared to a higher LTV of 90% where a 10% drop would result in negative equity.

Most mortgage lenders price their mortgages in LTV bands, which are usually set at 5% intervals between 60% and 95%.

However, once you get to 60% LTV or below, your loan-to-value is less important in determining the rate lenders charge. Mortgage deals at 60% LTV typically offer the lowest rates, so whether you own 90% of your home or 50%, you may not notice much difference (if any) in the interest rate you receive.

Key takeaways

• Loan-to-value, or LTV, is the percentage of your property’s value that a mortgage finances.
• LTV is calculated by dividing your mortgage by your property’s value.
• The lower your LTV, the more competitive deals you will typically be eligible for.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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How to influence your loan-to-value

There are a number of ways you can change your loan-to-value, if you’re about to remortgage and want to reduce your LTV, for example.

Repaying your mortgage

If you have a repayment mortgage, you will be slowly reducing your mortgage balance through your monthly payments, lowering your LTV in the process.

You can accelerate the repayment of your mortgage by overpaying, which could potentially help you clear the loan sooner and put you into a lower LTV band quicker. However, make sure you check for any early repayment charges and the terms of any overpayments; most lenders allow you to overpay up to 10% of your outstanding balance each year without penalty.

If you've got an interest-only mortgage, remember that you're only covering the interest with your monthly payments which means your balance (and LTV) stays the same.

Maintaining and increasing the value of your property

As well as your mortgage, the value of your property influences your loan-to-value. By keeping your house well-maintained you could help it to hold its current value, which in turn could help to improve your LTV (as long as you continue to pay off your mortgage).

You may be able to reduce your LTV further by taking steps to increase your property's value with certain home improvements, such as replacing the windows and doors with uPVC, upgrading the kitchen or bathroom and adding an extension or an en-suite.

If your property’s value increases (and you don’t borrow more on your mortgage or take out any loans secured against your home), this could help lower your LTV when it's time to remortgage.

For example, if you have a mortgage of £150,000 on a property worth £200,000, your LTV is 75%. But, if you increase the value of your property to £220,000 and your mortgage remains at £150,000, your LTV will drop to 68%.

Looking at cheaper properties

If you’re buying your first home or moving house, you could reduce your loan-to-value by looking for cheaper properties. This may not be an option for everyone as you may have fixed requirements for your property (such as a certain location or a minimum number of bedrooms), but it’s worth considering how the cost of a property will affect your LTV.

The lower the property value, the less you’ll need to borrow with a mortgage. This means your loan-to-value will be lower without needing to increase your deposit or the equity you already own.

For example, if you’re looking to buy your first home and have a deposit of £30,000, your LTV will be 90% if you purchase a property for £300,000. However, if you widen your search and find a property worth £200,000, your LTV will drop to 85% which could help you access lower rates.

Is a high loan-to-value good or bad?

While mortgages with a higher loan-to-value have some downsides, they can be good for borrowers with a small deposit or those who own less equity. Higher LTV deals allow these borrowers to continue with their purchases and may be the only way a first-time buyer with a small deposit can get on the property ladder, for example.

However, higher LTV mortgages, such as those at 90% or 95% LTV, typically charge higher rates of interest so, ideally, you want to have an LTV as low as possible.

High LTV mortgages also come with a greater risk of falling into negative equity if property prices fall.

Lenders rely on the fact that, should you default on your mortgage, they can sell the property to recover their debt and costs. So, if you have very little equity in your home, meaning you have a high LTV, then it may only take a small reduction in house prices to result in negative equity and a potential loss for the lender.

What is a good loan-to-value ratio?

There is no definitive good LTV and, unlike a credit score, it’s not connected to your creditworthiness or a score that decides if a lender will give you a mortgage.

LTV is a key factor lenders use to price their mortgages based on how much equity is in the home at the point you purchase or remortgage.

You can normally access more deals and get a better mortgage rate if you have a lower LTV, with anything lower than 80% typically considered “good”.

The lowest LTV band is usually 60% – at this point, most lenders do not reduce their rates any further for lower LTVs.

What LTV do first-time buyers need?

As a minimum, most lenders require first-time buyers to have a deposit of at least 5% of their property purchase, which means they would need a 95% LTV mortgage. The Mortgage Guarantee Scheme helps support the availability of 95% LTV mortgages for first-time buyers.

It may be possible for first-time buyers to get a mortgage at 100% LTV without any deposit, but these will come with specific eligibility criteria and may not be right for everyone.

Bear in mind that, even though first-time buyers may be able to purchase a home with a high LTV mortgage, it’s always worth trying to save up as large a deposit as possible to improve your chances of finding a competitive deal. Lower LTV mortgages, such as 90% or 80% LTV deals, typically charge lower rates than 95% LTV deals, which could save first-time buyers a significant amount in interest over the long term.

What is the maximum loan-to-value?

In the UK, the maximum LTV available without the help of a family member or guarantor mortgage is typically 95% LTV. This means the mortgage would cover 95% of your property’s value. A handful of lenders may offer 100% mortgages, but these will be subject to certain terms and conditions.

Not all lenders offer high LTV mortgages and the maximum LTV available can vary, so it’s worth checking the range of deals and LTVs currently available on our mortgage charts.