What is Loan to Value?

17/03/25

What is Loan to Value?

Loan to Value (LTV) is how much you are borrowing against the value of the property. For example, if you buy a house for £200k and you have a 5% deposit (10k) you will borrow £190k which is 95% of the property’s value.

Why does Loan to Value Matter?

The higher the LTV, the higher the risk to the lender. This risk is usually reflected in the interest rates. The higher the LTV the higher the interest rates.

A low LTV could mean you’re offered lower interest rates therefore, your mortgage payments would be lower.

Working out the LTV

The easiest way to work out your LTV is to divide your loan amount by the value of the property then multiply by 100 to show as a percentage.

Here’s an example:

The house value £350,000
Your deposit/equity £35,000
The mortgage amount £315,000

315,000 ÷ 350,000 = 0.9

The multiply this by 100 to show as a percentage

0.9 × 100 = 90%

What are the Laon to Value Brackets?

Lenders work to Loan to Value Brackets, the first backet being 95% LTV then 90%, 85%, 80% and so on.

If you buy a house at 95% LTV this will bring you the higher interest rates, then each 5% lower this should be reflected in the rate offered.

You must make it into the next bracket to reap the benefits, for example, if you bought a property for £100k and have a deposit of £9,000 your LTV would be 91% therefore you would still be in the 95% LTV bracket but with £10k deposit (10%) you would then move into the next LTV bracket (90%).

If you would like to discuss your options, We offer free initial consultation with no obligation.

Face to face appointments available at our Tarleton Office in Preston

We also offer remote and telephone appointments during the day and in the evening.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY.

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT