Loan-to-value ratio
Quick answer: Loan-to-value (LTV) ratio compares the size of a mortgage with the value of the property. Mortgages with a lower LTV can have better rates and may be easier to get. Mortgages with a higher LTV need a smaller deposit but come with higher rates and larger monthly payments.
If you’re buying a home, the loan-to-value (LTV) ratio you’re aiming for affects your mortgage in a few different ways. This includes whether you’re approved for a mortgage, how much deposit you need, the interest rate you get and the size of your monthly payments. If you’re already a homeowner, your loan-to-value ratio may change as you pay off your mortgage or if your home’s value goes up or down. This may affect the offers you see if you decide to remortgage or move house.
This guide explains what loan-to-value ratio means, ways to calculate your LTV and how to get the right LTV mortgage for you.
LTV meaning: what is loan-to-value ratio?
Loan-to-value ratio is a way of showing how much you owe on your mortgage compared to how much your home is worth. LTV is usually shown as a percentage. For example, if you borrow £200,000 to buy a home that costs £250,000, your LTV is 80%. This means you need a 20% deposit (£50,000).
Often, a lower loan-to-value ratio can mean access to better deals, like lower mortgage interest rates. Understanding what LTV means for you can help you make decisions about home ownership, like how much to save for a house deposit or whether to remortgage.
How do you calculate loan-to-value ratio?
To find your loan-to-value ratio, you’ll need to know:
- The property value — If you’re calculating LTV for your current home, find an estimate of its value. If you’re planning to buy a home, you can use the property price you’re expecting to pay.
- The mortgage amount — For your current home, use the amount you owe on your mortgage. For a future home, use the amount you expect to borrow. This is the property price minus your deposit. Use our borrowing calculator to work out how much you could borrow.
Calculate your loan-to-value ratio in two steps:
- Divide the mortgage amount by the property value. For example, £210,000 ÷ £300,000 = 0.7.
- Multiply the result by 100 to get a percentage. For example, 0.7 × 100 = 70.
In our example, the mortgage amount is £210,000, the property is worth £300,000 and the LTV ratio is 70%. This means you’re borrowing 70% of the property’s value.
What is my loan-to-value ratio on my current home?
Your current loan-to-value ratio may be different from when you first bought your home. If you owe less on your mortgage or your property is worth more, your LTV may be lower. If you’ve borrowed more on your mortgage or your property’s value has dropped, your LTV may have risen.
Calculate your LTV by dividing what you owe on your mortgage by your property’s value, then multiply by 100 to get a percentage. You can usually check what you owe by logging into your lender’s online account or looking at your latest statement. You should also be able to see how much you owe on your mortgage in your Experian Credit Report. For the property’s value, companies like Rightmove and Zoopla offer free online estimates based on things like your postcode and properties that have sold recently in your area. If you need a more accurate LTV, consider getting a professional property valuation.
Credit Expert
What our expert says
Your loan-to-value (LTV) ratio is an important factor to consider when buying a home or remortgaging. Lower LTVs usually mean less risk for the lender and can unlock better rates. Higher LTVs can help you buy with a smaller deposit, but you’ll often need good credit and sometimes a guarantor.Jacqui Hamilton, Experian UK
What is a good loan-to-value ratio?
A good loan-to-value ratio could be lower, like 60%, or higher, like 95%, depending on your situation and what’s important to you.
Homeowners generally want to see their loan-to-value ratio go down, as this means they own more of the property’s value. This is called home equity. Your LTV should fall as you pay off your mortgage and if your property’s value goes up.
Home buyers should consider their personal circumstances when choosing between a higher or lower LTV on their mortgage.
- A higher loan-to-value mortgage may help you borrow more or put down a smaller deposit. It usually comes with higher rates and larger monthly payments. Some reasons for getting a higher LTV mortgage could be to buy a home sooner, use more of your savings elsewhere, or remortgage as a way to borrow against your home. A 95% LTV mortgage is usually the highest that lenders offer.
- A lower loan-to-value ratio may boost your chances of getting a mortgage as it usually means less risk for lenders, although there are other ways, like using a guarantor or improving your credit score for a mortgage. A lower LTV can also unlock cheaper mortgage rates. Lenders typically offer LTV ratios in bands like 95%, 90% and 85%. Moving into a lower band often means a better rate. The best rates are usually available on 60% LTV mortgages.
Want to see what mortgage rate you could get? Check your mortgage offers without affecting your credit score. Just remember, we’re a credit broker, not a lender.
What’s the minimum loan-to-value for a mortgage?
A 60% LTV mortgage is usually the minimum loan-to-value lenders offer. Mortgages at 50% or 40% LTV are rare and may not come with lower rates than a 60% LTV deal.
If you’re looking for an LTV below 60% because you want to pay less interest, making mortgage overpayments could be another option. Paying off your mortgage faster means you pay less interest overall. Some lenders let you overpay up to 10% of your outstanding mortgage each year without an early repayment fee.
If you’re looking to borrow against your home but you have a very low LTV, consider an equity release mortgage or secured loan instead, or a personal loan for smaller amounts.
How to get a low loan-to-value ratio
If you already own property and want a lower LTV deal, you could consider:
- Paying off your mortgage faster — Your LTV should usually fall over time as you make monthly repayments. Overpaying your mortgage could make it drop quicker. Some lenders let you overpay by up to 10% a year without an early repayment fee.
- Increasing your property’s value — Improvements or extensions that add value to your home could help reduce your loan-to-value ratio.
If you’re buying a home, you could try to get your minimum loan-to-value mortgage by:
- Saving a larger deposit — The more you put down upfront, the smaller the percentage you need to borrow.
- Negotiating the purchase price — Agreeing a lower price can reduce your LTV because you shouldn’t need to borrow as much.
Remember, you must meet the lender’s criteria to get approved for a mortgage. This includes passing their affordability and credit checks. It’s worth checking your credit score before you apply to get an idea how lenders view your credit history.
What’s the maximum loan-to-value for a mortgage?
A 100% loan-to-value mortgage lets you borrow the full property price, meaning you don’t need to put down a deposit. These mortgages became much rarer after the 2007–2008 financial crisis. Lenders take on more risk with 100% LTV, so these deals are often guarantor mortgages with higher interest rates. Most lenders offer 90% or 95% as their maximum loan-to-value mortgage.
It’s important to know that higher LTV mortgages have bigger monthly payments, as there’s more to pay back overall. Even if there’s no deposit, you still need savings to cover the other costs of buying a home, like legal fees, surveys and moving expenses.
How to get a 95% loan-to-value mortgage
Because higher LTVs carry more risk for lenders, it can be harder to get approved for a 95% LTV mortgage. But there are steps that may improve your chances:
- Save a 5% deposit — First-time buyers may be able to build up a house deposit faster with a Lifetime ISA. It adds a 25% government bonus, up to £1,000 a year, on your savings. MoneyHelper has more advice on saving a deposit.
- Consider financial support — For example, the First Homes scheme offers discounted new-builds for some first-time buyers, and Shared Ownership lets you buy a percentage of a property and pay rent on the rest.
- Use a guarantor — A guarantor is someone, often a family member, who legally agrees to pay the mortgage if you can’t. They usually need to pass a credit check and should understand the risks of being a guarantor.
- Have a stable income — Lenders need to see you can comfortably afford the monthly mortgage payments. It can help to show you’ve been in the same full-time job for a while, or at least two years of certified accounts if you’re getting a mortgage while self-employed.
- Get your credit in good shape — Lenders run a detailed credit check when you apply for a mortgage. Improving your credit score can boost your chances of approval. Check your free score without affecting it to get an idea where you stand with lenders.
- Shop around — Compare mortgages to find your best offers. It’s free and won’t affect your credit score. Simply fill in a few details and we’ll connect you to our trusted partner, Picnic, for mortgage offers and expert advice.
Just remember, we’re a credit broker, not a lender.
Frequently asked questions
Can I get a 95% LTV mortgage?
It depends on your situation and the lender’s criteria. With a 95% loan-to-value mortgage, you’ll need a deposit of 5% of the property price. The lender will run checks to understand how you’ve managed credit in the past and whether you can comfortably afford the monthly payments. Before applying for a mortgage, it can help to check your credit score and review your finances to make sure you’re in the best possible position.
What loan-to-value ratios are available for buy-to-let and investment properties?
Loan-to-value ratios are usually lower for rental and investment properties than for residential mortgages. Most lenders offer buy-to-let mortgages up to 75% LTV. This means you’ll typically need a deposit of at least 25% of the property price. Lenders may also look at how much you expect to earn from rental payments when deciding how much to lend you.
How can I improve my chances of getting a high LTV mortgage?
If you’re looking to get a high loan-to-value mortgage, it can help to improve your credit score and get your finances in good shape. Try to pay off credit cards and avoid large expenses or credit applications in the months before a mortgage application. Some buyers use government home buying schemes or a guarantor to improve their chances of approval. It’s worth comparing mortgages to find the right offer for you.
How can I compare mortgages?
It’s simple to compare mortgages with Experian. Fill out a few details to tell us about your situation and what you need from a mortgage.
Just remember, we’re a credit broker, not a lender.