What loan to value (LTV) means for your mortgage

What is loan to value?

Loan to value (LTV) is the size of your mortgage as a percentage of the value of the home. If you borrow £180,000 to buy a £200,000 home, the mortgage is 90% of the value, so the loan to value is 90% and your deposit is the other 10%. Lenders use it to decide which mortgages you can have and what rate you pay.

It is one of the first figures a lender looks at, alongside your income and outgoings. The mortgage affordability guide covers the income side. This guide covers the loan to value side: what it is, how it moves and why a few thousand pounds of deposit can change the rate.

How to work out your LTV

The formula is the same whether you are buying or already own.

LTV = (mortgage ÷ value of the home) × 100

Worked example 1: buying

You are buying a home for £300,000 and have a £30,000 deposit.

1. Mortgage: £300,000 - £30,000 = £270,000.
2. Divide by the value: £270,000 ÷ £300,000 = 0.9.
3. Multiply by 100: 90% LTV.

Worked example 2: already an owner

You owe £150,000 on a home now worth £250,000.

1. Mortgage: £150,000.
2. Divide by the value: £150,000 ÷ £250,000 = 0.6.
3. Multiply by 100: 60% LTV.

Your share of the home, the remaining 40% or £100,000, is called your equity.

The mortgage calculator shows the loan and the monthly payment for a price, deposit and term you choose, as an illustration, not advice.

Deposit and LTV: two sides of one number

When you buy, your deposit and your loan to value always add up to 100%. A 10% deposit is a 90% LTV mortgage. A 25% deposit is a 75% LTV mortgage.

MoneyHelper, the government-backed guidance service, says most lenders want a deposit of at least 5% of the value of the home. The government's Mortgage Guarantee Scheme, permanently available from July 2025, supports lenders offering mortgages at 91% to 95% LTV to eligible first-time buyers and home movers across the UK. The schemes pages set out that scheme and the others that can help with a deposit.

An "LTV mortgage" is not a special product. When a lender advertises a "90% LTV mortgage", it means a deal open to people borrowing up to 90% of the value.

LTV bands and why rates step at them

Lenders do not set a different rate for every possible loan to value. They group borrowers into bands, commonly with ceilings such as 60%, 75%, 80%, 85%, 90% and 95%, and publish a set of deals for each band. The exact bands vary by lender.

A lower LTV usually means a lower rate. The reason is risk: if a borrower cannot pay and the home has to be sold, a lender that lent 60% of the value has far more room to get its money back than one that lent 95%. A higher LTV loan is more exposed to a fall in prices, and the lender charges for that.

MoneyHelper says the lowest rates generally go to buyers with a deposit of 40% or more, which is a 60% LTV. Where a lender's lowest band is 60%, borrowing less than that does not bring a lower rate from that lender: a 40% LTV borrower is offered the same deals as a 60% one.

Because rates step at the band edges, a small change in deposit can matter. On a £250,000 home, a deposit of £24,000 gives a 90.4% LTV, which falls in the band above 90%. A deposit of £25,000 gives exactly 90%, which falls in the band below. An extra £1,000 moves the whole loan to the lower band's rates.

To see the steps in lenders' published rates, enter different deposits in the mortgage rates comparison. It shows each lender's published rates for your price, deposit and term, each linked to the lender's own page, and the first-time buyer rates page does the same for smaller deposits. It is an illustration, not advice, and names no product as right for you.

How LTV changes over time

Your loan to value is not fixed on the day you buy. Both halves of the sum move.

• The loan falls as you repay. On a repayment mortgage every monthly payment reduces what you owe. On an interest only mortgage the loan does not fall unless you make overpayments; see the interest only mortgage guide.
• Overpayments speed it up. Extra payments reduce the loan faster. The mortgage overpayment calculator shows the effect, and the mortgage overpayment guide covers the limits lenders set.
• The value can rise. If the home is worth more, the same loan is a smaller share of it.
• The value can fall. If the home is worth less, the same loan is a bigger share of it, and your LTV goes up even though you have paid every month.

For example, you buy at £300,000 with a £270,000 mortgage, which is 90% LTV. Some years later you owe £250,000. If the home is still worth £300,000, your LTV is about 83%. If it is now worth £330,000, your LTV is about 76%. If it has fallen to £280,000, your LTV is about 89%.

Negative equity

Negative equity is when you owe more on the mortgage than the home is worth, which is an LTV above 100%. If you owe £210,000 on a home worth £200,000, your LTV is 105% and you are £10,000 in negative equity.

It matters mainly when you want to move or switch lender:

• MoneyHelper says a new lender will only lend against the current value of the home, which makes remortgaging elsewhere harder and can leave a shortfall.
• If you sell, the sale price will not clear the mortgage, and you still owe the shortfall to the lender.
• MoneyHelper says that if you do not have to sell and can keep up the monthly payments, negative equity may not affect your everyday finances. Whether your existing lender will offer a new rate is a matter for that lender.

Negative equity does not change your monthly payment by itself, and it shrinks as you repay the loan or as prices recover. MoneyHelper notes that it can be a particular problem for someone who borrowed the whole price and sells early in the mortgage. MoneyHelper has a guide to negative equity and the options it leaves.

Loan to value on a new build

The formula is the same for a new-build home, but three things can change the figures that go into it.

Lenders' own new-build limits

Each lender sets a maximum LTV for the homes it will lend on, and some set a separate, lower maximum for new-build homes. Some also set a lower limit for a new-build flat than for a new-build house, which means a bigger deposit. These limits are the lender's own choice, they differ from lender to lender, and they change, so the deposit that works for one plot may not work for another. The new-build rates page shows published rates on the new-build view, and the new-build mortgages guide goes through the criteria.

Builder incentives

A builder must list every incentive, with its value, on the UK Finance Disclosure Form. The form goes to the solicitor or conveyancer acting for the lender and, on request, to the lender's valuer. Lenders decide how to treat each one. Some take cash incentives, such as a deposit contribution or cashback, off the price before working out the LTV.

For example, a home is priced at £300,000 and the builder offers £10,000 towards your deposit. A lender that deducts it treats the price as £290,000. A 90% loan is then £261,000, not £270,000, and your own money has to make up the difference. The incentives guide compares the common offers.

The valuation

The lender's valuer gives the lender a figure for what the home is worth, and can ask to see the Disclosure Form. If the valuation is below the price, a lender normally applies its LTV to the valuation. On a £300,000 home valued at £290,000, a 90% loan is £261,000, so you would need £39,000 of your own money in place of £30,000, unless the builder reduces the price.

LTV when remortgaging

When your deal ends, your loan to value is worked out again from the loan you still owe and the home's current value. If it has dropped into a lower band, the deals open to you are usually cheaper than those you had at the start.

For example, you owe £180,000 and the home is valued at £240,000. £180,000 ÷ £240,000 = 0.75, so you are at 75% LTV, whatever your LTV was on the day you bought.

Things to know:

• Whose valuation. A new lender arranges its own valuation. MoneyHelper notes that an existing lender's figure for your home's value is linked to a house price index. Either figure can differ from your own estimate, and MoneyHelper says you can ask a lender to reconsider a valuation you think is too low, with evidence such as sale prices of similar homes.
• Borrowing more. Adding to the loan raises the LTV, and may move you up a band.
• A fall in value. If prices have dropped, your LTV may be higher than you expect, which narrows the choice of deals. MoneyHelper notes that a higher LTV reduces the chance of remortgaging to a new lender.
• New-build buyers. For a buyer with a small deposit, the first remortgage is when the home's value as a second-hand home is tested for the first time.

The remortgage calculator compares the cost of a new deal with staying where you are, and the remortgaging guide and the standard variable rate guide explain what happens when a deal ends.

Before you choose a deposit: a short checklist

1. Work out your LTV at the price you expect to pay.
2. See how close you are to a band edge, and what an extra sum of deposit would do.
3. Keep back enough for the other costs of buying. The cash you need calculator adds them up.
4. On a new build, check the lender's maximum LTV for the home and how it treats incentives.
5. Allow for a valuation below the price.
6. Ask a qualified, regulated mortgage adviser if you want a recommendation for your circumstances.