What Is Loan-to-Value (LTV) and Why Does It Matter?

Loan-to-value, or LTV, is the most important number in your mortgage application after your income. It's the percentage of the property price you're borrowing — and it determines, more than almost anything else, what interest rate the lender will offer you.

How LTV is calculated

LTV = (mortgage amount ÷ property value) × 100

So if you're buying a £250,000 home with a £25,000 deposit, you're borrowing £225,000:

LTV = (£225,000 ÷ £250,000) × 100 = 90%

Your deposit is 10%. Your LTV is 90%. The two add up to 100% of the property price.

Why LTV matters so much

The lower your LTV, the less risk the lender is taking. If house prices fall 10% and they have to repossess and sell, a 60% LTV loan is still fully recovered. A 95% LTV loan might leave the lender out of pocket.

Lenders price this risk into the interest rate they offer. The result is a stepped pricing structure:

LTV band Indicative rate (April 2026)
60% or less ~3.85%
65–75% ~3.95%
75–80% ~4.05%
80–85% ~4.20%
85–90% ~4.40%
90–95% ~4.75%

The gap between 95% and 60% LTV is roughly 0.9 percentage points. On a £200,000 mortgage over 30 years, that's about £100/month — £36,000 over the term.

The LTV bands that matter

Lenders price products at specific thresholds. Cross one and you drop into a cheaper band. The breakpoints are:

  • 60%: best rates kick in
  • 65%, 70%, 75%: moderate steps down
  • 80%: significant break — many lenders price 80% as their "standard" tier
  • 85%: meaningful jump
  • 90%: another major step
  • 95%: the riskiest tier with the fewest lenders

You don't have to be exactly on the threshold — even 60.1% counts as the 60–65% band. So getting to just under a band can unlock big savings. If you're at 81%, finding £2,500 of additional deposit to drop to 79.9% can shift you to the next band.

How LTV changes over time

Your LTV moves whenever:

  • You pay down the loan (LTV falls)
  • The property value rises (LTV falls)
  • The property value falls (LTV rises)
  • You borrow more (LTV rises)

Repayment mortgages reduce the loan slowly at first then faster — most of your early payments go on interest. After 10 years on a 30-year repayment mortgage at 5%, you've typically paid down only ~17% of the original loan.

But house price appreciation can do far more. A 30% house price rise on a 90% LTV loan can drop you to ~70% LTV without you paying down a penny.

Why LTV matters at remortgage

When you remortgage, your new LTV is calculated on the current property value. If your house has risen and you've paid down some of the loan, you may have crossed multiple bands.

Worked example:

  • 2019: bought a £200,000 home with a £20,000 deposit. Loan: £180,000. LTV: 90%.
  • 2024: paid down to £165,000. House now worth £230,000. New LTV: £165,000 ÷ £230,000 = 72%.

You've crossed from the 90% band to the 75% band. New rates available will be substantially cheaper. Read How to remortgage your home.

How to lower your LTV before applying

Three options:

  1. Save more deposit — the most direct route. See How to save for a house deposit.
  2. Buy a less expensive property — same deposit becomes a higher percentage
  3. Use a gifted deposit — parental help bumps your deposit and lowers your LTV

For first-time buyers we suggest aiming for at least 90% LTV (10% deposit) before buying, because rates start to become reasonable below 90%. The full picture is in How much deposit do I need?.

LTV vs LTI (loan-to-income)

Don't confuse LTV with LTI:

  • LTV = how much you're borrowing relative to property value
  • LTI = how much you're borrowing relative to your income (typically capped at 4–4.5×)

Both must be satisfied. You could have a 70% LTV that the lender loves but a 5× LTI that they reject. See How much can I borrow for a mortgage?.

What about negative equity?

Negative equity is when LTV exceeds 100% — your loan balance is bigger than the property's current value. This happens when prices fall faster than you've paid down. You can't sell without bringing cash to the table, and you can't usually remortgage to a new lender (your existing one will let you continue or product-transfer).

The 2008 crash left many borrowers in negative equity for 5–7 years. The post-2022 cooling has been milder, but always model what would happen at –20% house prices before borrowing at 95% LTV.

A worked example with our calculator

Try the mortgage calculator with a £250,000 property:

  • 5% deposit (£12,500): LTV 95%, monthly payment at 5.20% over 30 years = £1,302
  • 10% deposit (£25,000): LTV 90%, at 4.85% = £1,191
  • 15% deposit (£37,500): LTV 85%, at 4.65% = £1,094
  • 25% deposit (£62,500): LTV 75%, at 4.40% = £939

Going from 95% to 75% LTV saves £363 a month — over 30 years, around £130,000.

Get a free mortgage quote — see live rates at your actual LTV across the market.

Frequently asked questions

Is 100% LTV ever available? Rare but yes — Skipton Building Society's Track Record mortgage and a handful of guarantor products allow it. Rates are higher.

What LTV is best for a first-time buyer? 85–90% is the practical sweet spot for most. Below 85%, rates plateau. Above 90%, rates rise sharply.

Does the lender's valuation determine my LTV? Yes — it's the lower of purchase price and lender's valuation that's used. If the lender values your £250k property at £240k, your LTV is calculated against £240k.

Can I take out a second charge to lower my LTV on the first mortgage? No — second charges add to your total debt against the property, increasing combined LTV.

Why do banks reduce rates again at very low LTVs (under 60%)? At very low LTV, the bank's downside risk is essentially zero — even a major price crash leaves them whole. They reward this with the cheapest rates.

This article is for informational purposes only and does not constitute financial advice. Always consult a qualified mortgage adviser before making a decision.