Loan to value (LTV) explained

Loan to value, almost always shortened to LTV, is the size of your mortgage compared with the value of the property, expressed as a percentage. Debt charity StepChange defines it simply as "the balance of your mortgage, compared to the value of your property. Expressed as a percent (%)"¹. If you borrow £180,000 on a home worth £200,000, your LTV is 90%².

LTV is one of the most important numbers in any mortgage, because lenders price their deals around it. Generally, the lower the LTV, the lower the rate¹. A borrower with a small deposit sits in a high LTV band, pays more for the same loan and has fewer deals to choose from; a borrower with a large deposit sits in a low band and is usually offered cheaper rates and more choice. The same measure follows you for the life of the loan: as you pay the mortgage down and as your property's value changes, your LTV changes too, and that determines what you are offered when you remortgage.

What loan to value means

LTV measures how much of the property the lender is financing and how much is covered by your own money, your deposit or the equity you already hold. Yorkshire Building Society describes it as the size of the loan in relation to the value of the home, and gives the standard example: buying a £200,000 home with a £20,000 deposit means borrowing £180,000, and "£180,000 is 90% of £200,000. So your loan to value is 90%"².

The number matters to a lender because it measures its exposure. If you have a lower loan to value, say 60% and under, lenders may view you as a safer option than someone with a 90% LTV, because there is a bigger cushion between what is owed and what the property could be sold for if things went wrong². If your loan to value is too high, some lenders might not let you borrow at all².

LTV is not a fixed feature of a mortgage. It is a snapshot. On a repayment mortgage the balance falls every month as you pay off capital, and the property's value moves with the market, so the LTV recorded at the start of the loan is usually higher than the LTV a few years later. That movement is what can move you into a cheaper band when your deal ends. The mechanics of how the balance falls are covered in repayment mortgages explained.

How to work out your LTV

The calculation is a simple one. Divide your mortgage amount by the value of the property, then multiply it by 100³. A £60,000 mortgage on a property worth £100,000 gives a 60% LTV¹. The same method applies when remortgaging: someone remortgaging for the £180,000 they owe on a property worth £300,000 is at a 60% LTV⁷.

The deposit side works the same way in reverse. If you have a 10% deposit, your LTV will be 90%, because the mortgage covers the other 90% of the price; with a 15% deposit, your LTV will be 85%, and so on⁵.

One point catches buyers out: the "value" in the calculation is not always the price you agreed. A mortgage valuation is carried out for the benefit of the lender, to check the property will act as viable security for the loan, and its scope is limited⁸. Coventry Building Society states the rule plainly: "We'll calculate the LTV on the purchase price (or net purchase price, where applicable) or the valuation, whichever is the lower"⁹. If a surveyor down values the property, your LTV is worked from the lower figure, which can push you into a higher band than you planned for. How valuations work and what to do about a down valuation are covered in mortgage valuations and surveys.

LTV bands usually run in 5% steps from 60% to 95%

Lenders do not price mortgages on your exact LTV. They group borrowers into bands, which are usually set at 5% intervals between 60% and 95%³. A borrower just inside a band and one at its top edge are typically offered the same deals, because both sit in the same "up to" band.

Guidance on where these bands sit in practice is consistent across sources. A 60% LTV or lower is described as excellent, meaning a deposit of at least 40%; below 75% is very good, meaning at least a 25% deposit; and below 80% is considered good, meaning at least a 20% deposit³. Lenders usually reserve their best rates for people with a deposit of at least 40%, which is a 60% LTV³.

The banding stops at the bottom. Once your loan-to-value is below 60%, lenders will typically offer you the same deal whether your LTV is 50% or 35%⁷, and most lenders offer the same rate for LTVs lower than 60%⁵. So there is a floor to the benefit: paying your balance down from 60% to 50% improves your security but does not usually improve your rate.

At the top end, the ceiling for residential lending is 95% LTV: mortgages are generally available at up to 95%¹⁰. Buy-to-let works to a lower ceiling, with lenders usually requiring at least a 20% deposit, meaning a maximum LTV of 80%³, and bridging loans are usually capped at 75% of the value of your property¹¹. Later-life lending runs lower still: most new equity release plans taken out in the first half of 2025 had an LTV in the 20% to 40% range¹².

A lower LTV usually means lower rates and more choice

The core trade-off in the mortgage market is deposit size against rate. Generally, the lower the LTV, the lower the rate¹. Although mortgages are available with just a 5% or 10% deposit, a bigger deposit may get you a lower mortgage rate or a wider choice of deals¹³. Lenders reserve their best deals for borrowers at a lower loan-to-value, typically in the 60% to 65% range⁷.

The reason is risk. A lender advancing 60% of a property's value has a large margin of safety if house prices fall or if it has to repossess; a lender advancing 95% has almost none. That is reflected in how the market behaves. Loans with an LTV of 75% or less accounted for just under 60% of regulated mortgage lending in 2016, a similar picture to 2007, while high LTV lending at 90% to 95% constituted 9% of lending in both 2007 and 2016¹⁴. Very high lending above 95% LTV made up just 0.4% of lending in 2016, having already been only around 5% of new lending in 2007¹⁴. Before the 2008 financial crisis the market went further still: some mortgage lenders were offering up to 125% LTV, lending more than the property was worth¹⁵.

High-LTV lending is a normal part of the first-time buyer market rather than a fringe product. In the first half of 2015, 21% of all first-time buyer mortgages had a loan-to-value of between 90% and 95%¹⁶. But it is a minority of the market overall: under the Mortgage Charter, lenders reported having around 10% of owner-occupier mortgages on their books with loan-to-value rates greater than 75%, compared with around 25% before the 2008 financial crisis¹⁷.

95% mortgages: borrowing with a 5% deposit

A 95% mortgage is a loan for 95% of a property's price, where you put down a 5% deposit to cover the rest¹⁸. You will usually need a deposit of at least 5% of the property's value to get a mortgage⁴, so 95% is the highest band most mainstream lenders offer to ordinary buyers. On a £200,000 home, a 5% deposit is £10,000; on a £250,000 home it is £12,500; on a £300,000 home, £15,000; and on a £350,000 home, £17,500¹⁹.

95% mortgages are theoretically available to both first-time buyers and home movers¹⁸, though in practice most borrowers in this band are buying their first home. How much you can borrow is set by affordability rather than by the deposit: you can usually borrow up to four and a half times your salary, or combined salary if you are buying with someone else¹⁸. As an example, if you had saved a 5% deposit of £10,000 for a £200,000 home, you would usually need a salary of at least £42,000, or a combined salary of that amount for a couple, for a £190,000 loan¹⁸.

Government schemes have been used to keep this band of the market open. The Mortgage Guarantee Scheme was designed to sustain availability of 91% to 95% loan-to-value mortgages by providing participating lenders with a government-backed guarantee²⁰, with lenders required to offer repayment mortgages at between 91% and 95% loan to value²¹. When 95% mortgages were pledged in 2020, the aim was to help the two million prospective first-time buyers who could afford mortgage repayments but were struggling to get approved for a home loan¹⁹. For new-build homes, the Deposit Unlock scheme enables buyers to buy with just a 5% deposit²².

The trade-off is price and risk. Taking out a 95% mortgage could mean higher interest rates, difficulty remortgaging to a better rate when your deal ends, and risk of negative equity if the value of your home falls¹⁸. Your starting equity is thin: with a 5% deposit, your equity to begin with is 5%²³, so even a small fall in property prices can wipe it out.

What lenders check before offering a high-LTV mortgage

A high LTV does not just change the rate, it changes how closely a lender looks at you. Before making a mortgage offer, a lender will look at your savings, spending habits and credit rating to determine how much it would be prepared to lend you¹³. For 95% mortgages specifically, lenders assess the full range of your income, regular outgoings and any debt, and stress test whether you could still afford the payments if interest rates were to rise¹⁸.

Some groups face higher hurdles at high LTV. Lenders will usually require a deposit of at least 10% of the purchase price if you are self-employed²⁴, which caps most self-employed borrowers at 90% LTV rather than 95%, though self-employed borrowers meeting a lender's criteria can usually borrow up to four and a half times their annual household income²⁵. Credit history matters too: a first-time buyer with a small deposit looking to get a 95% mortgage may struggle to borrow at such a high loan-to-value with a series of missed payments²⁶. Options in that situation are covered in getting a mortgage with bad credit.

The property itself can set limits. Some lenders cap loan-to-value ratios at 75% for new-build apartments²², so a buyer with a 10% deposit may find fewer lenders willing to lend at all on certain properties. New-build homes generally are covered in mortgages on new-build homes.

The risks of borrowing at a high LTV

The main risk of a high LTV is negative equity: owing more on your mortgage than your home is worth. This happens when property values fall, and it matters most to borrowers who started with a small deposit, because they have the thinnest cushion. With a 5% deposit your starting equity is 5%²³, so a fall of that size puts you at the line, and anything larger puts you under it.

The consequences are practical rather than immediate. Negative equity does not affect a mortgage you are keeping up with: you keep paying as normal. It bites when you want to move or remortgage, because you cannot clear the debt by selling, and lenders may not offer you a new deal at a competitive rate²³. Taking out a 95% mortgage can make it difficult to remortgage to a better rate when your deal ends, as it can take a while to build up enough equity to reach a lower band¹⁸.

High-LTV borrowing is formally recognised as higher-risk lending. The FCA classifies higher-risk lending as an LTV over 90%, or an income multiple of 3.5 or more for single-income purchasers or 2.75 for joint-income purchasers⁶. Independent analysis uses the same line, defining high-risk loan-to-value ratios as greater than 90%²⁷.

Borrowers with small deposits sometimes consider family assistance instead. A guarantor arrangement can help someone borrow who would not otherwise qualify, but guarantor loans carry serious risks: the cost of the debt can be high and the interest rates can be high²⁸. Family-assisted mortgages, where a relative's savings or property provide security, are covered in joint borrower sole proprietor and family-assisted mortgages.

How LTV affects your rate when you remortgage

When your fixed or introductory deal ends, the LTV you are offered a new rate at is the one that exists at that moment, not the one from when you bought. Two things move it: the capital you have repaid, and any change in your property's value. If the value of your property has increased rapidly, you may find you are in a lower loan-to-value band and eligible for lower rates²⁹.

The scale of the movement for typical borrowers is substantial. The average homeowner remortgaging over the twelve months to mid-2023 had around a 50% loan-to-value ratio³⁰, far below the 90% to 95% band most first-time buyers start in. That gap is the combined effect of years of capital repayments and house price growth.

The band you land in determines the rates you are shown, and the floor at 60% applies here too: once your LTV is below 60%, lenders will typically offer you the same deal whether your LTV is 50% or 35%⁷. If you are borrowing more as well as remortgaging, the picture changes: when remortgaging a Help to Buy home, your loan to value normally cannot be more than 75% of the value of your home unless you are repaying part of your equity loan at the same time³¹. The process of switching deals is covered in remortgaging explained and product transfers.

Extra costs on top of the deposit

The deposit is the largest upfront cost but not the only one. Most mortgages carry upfront fees, such as a product or arrangement fee, and it is possible to add upfront mortgage fees to your loan rather than paying them in cash³². That convenience has a price: adding a fee to the mortgage balance means you pay interest on the fee, costing you far more overall⁷. Worked examples put the extra cost at £480 over a two-year term in a remortgage case, and just over £316 over a five-year fixed term for a first-time buyer³³.

Adding the fee also raises the loan, which raises the LTV, which can in turn affect the band of rates you are offered. The same applies to any other borrowing rolled into the mortgage. The full range of costs is covered in mortgage fees and charges.

The term you choose affects how fast your LTV falls, and there is a trade-off. Stretching a mortgage over a longer term lowers the monthly payments, but less of each payment goes towards the balance: over the first two years of a 95% LTV mortgage, a longer term means you pay £4,083 less off your mortgage balance than you would on a shorter term³⁴. A slower fall in the balance means arriving at your remortgage in a higher band. Term choices are covered in mortgage terms and extending your mortgage term.

Ways to lower your loan to value

There are only two moving parts, so there are only two levers: reduce the mortgage balance or increase the value side of the sum.

Reduce the balance. On a repayment mortgage this happens automatically, month by month. Overpayments speed it up, within your lender's overpayment allowance, and are covered in overpaying your mortgage. Choosing a shorter term does the same, at the cost of higher monthly payments³⁴. Avoiding adding fees to the loan keeps the balance lower than it would otherwise be³².

Increase the deposit before you buy. Guidance from lenders is blunt about the options: save up for longer, with a bigger deposit, or buy a cheaper property². A bigger deposit is the most direct way of improving your loan to value ratio, and a gifted deposit from family can help, as covered in can my mortgage deposit be gifted?.

Deal with a down valuation. If a surveyor values the property below the price you agreed, your LTV is calculated on the lower figure⁹. The first thing to do is try to renegotiate the sale price with the seller, as a down valuation is a strong bargaining tool; a last resort is to try an alternative lender that uses a different independent surveyor, which may give a valuation closer to the sale price⁸. The process is covered in how to challenge a mortgage down valuation.

Use the market's movement. Time is on the side of most borrowers: capital repayments plus house price growth moved the average remortgaging borrower to around a 50% LTV by 2023³⁰. Nothing needs to be done for this, only patience, and it is the reason many borrowers reach lower bands by their second or third deal.

Beware schemes that raise it. Borrowing more on your mortgage, porting to a more expensive property, or taking a second charge all raise the balance and so the LTV. Porting to a more expensive property means passing your lender's affordability checks, and you may have to pay a fee to increase your loan or take on another mortgage product at a different rate³⁵. These options are covered in borrowing more on your mortgage and second charge mortgages.

Help and protection

Mortgages are regulated financial products, and the rules around them exist partly because of what happened when high-LTV lending ran ahead of prudence: lending above 100% LTV before 2008 left borrowers with debts no sale could clear¹⁵. Today's affordability checks, stress tests and the FCA's higher-risk classification of lending above 90% LTV⁶ all shape what a lender may offer you, and the Mortgage Charter sets out further support for borrowers struggling with payments¹⁷.

If anything in the mortgage process goes wrong, complaints can be taken to the lender and then to the Financial Ombudsman Service, as covered in complaining to the Financial Ombudsman about your mortgage. Free, impartial help with mortgages and with debt is available from MoneyHelper and from debt charities such as StepChange, whose mortgage jargon guidance is one of the sources for this page¹. If you are struggling to pay, the steps a lender must take before repossession and the help available are covered in mortgage arrears and mortgage rules, your rights and protection.