Mortgages and Property

What Is Loan-to-Value (LTV)?

The ratio of your mortgage amount to the property value, expressed as a percentage. Lower LTV usually means better mortgage rates.

Definition

Loan-to-Value (LTV) measures how much you are borrowing relative to what a property is worth. A £270,000 mortgage on a £300,000 property is a 90% LTV. In the UK, the lowest mortgage rates are typically available at 60% LTV, with products available up to 95% LTV. Each 5% step in LTV usually unlocks a better rate tier. Lenders also use LTV to determine whether a valuation or survey is required. High LTV mortgages (above 85%) often require a higher arrangement fee or mortgage protection product. Remortgaging at a lower LTV as your property rises in value or your balance falls is a common way to secure a better rate.

Formula

LTV = (Mortgage amount / Property value) x 100

Example

You buy a £250,000 flat with a £25,000 deposit (10%). Your mortgage is £225,000. LTV = 225,000 / 250,000 x 100 = 90%.

Use It

Try the UK Mortgage Calculator

Related Terms

Stamp Duty Land Tax (SDLT)A tiered tax paid by property buyers in England and Northern Ireland, calculated on the purchase price.Fixed-Rate MortgageA mortgage where the interest rate is locked for an initial period (commonly 2, 3 or 5 years) regardless of Bank of England base rate changes.Interest-Only MortgageA mortgage where monthly payments cover only the interest charge; the capital borrowed must be repaid separately at the end of the term.

← Back to UK Glossary