Quick Answer (Read This First)
Loan-to-value, usually shortened to LTV, is the mortgage expressed as a percentage of the property's value. A £200,000 mortgage against a £250,000 property has an LTV of 80%.
Lenders use LTV bands when deciding which mortgage products you can apply for. A lower band can give you access to a lower interest rate, but 60% and 75% are not universal promises of the cheapest deal. The lender's products, fees and eligibility rules still matter.
Use this guide to work out your number and the cash needed to reach another band. Our mortgage guides cover the other parts of choosing and applying for a mortgage.
How to Calculate Your LTV
The calculation is:
Mortgage amount ÷ property value × 100 = LTV percentage.
For a purchase, start with the mortgage you need after putting in your deposit. The lender must also accept the valuation used for its lending decision.
For example, buying for £250,000 with a £50,000 deposit requires a £200,000 mortgage, before any fees added to the loan. If the lender accepts a £250,000 value:
£200,000 ÷ £250,000 × 100 = 80%.
For a remortgage, use the balance you expect to borrow on the new deal and the property value the new lender accepts. Your original purchase price and original mortgage are not necessarily the relevant figures now.
Why 60% and 75% Matter
Mortgage products often have a maximum LTV. A product advertised up to 75% is for borrowing within that limit; a borrower above it needs a different eligible product or a change to the borrowing or valuation.
The table shows the deposit needed at several commonly encountered thresholds. It assumes a £250,000 purchase and an accepted valuation of the same amount, with no fees added to borrowing.
| Maximum LTV | Mortgage at the limit | Deposit needed |
|---|---|---|
| 95% | £237,500 | £12,500 |
| 90% | £225,000 | £25,000 |
| 85% | £212,500 | £37,500 |
| 80% | £200,000 | £50,000 |
| 75% | £187,500 | £62,500 |
| 60% | £150,000 | £100,000 |
These are illustrative thresholds, not a list of products available from every lender. Some offer additional bands; some products stop at a lower maximum. Rates can be the same across more than one band.
At 75%, you have 25% of the property's value outside the mortgage. At 60%, that rises to 40%. The lender has a larger cushion if it must recover the loan through selling the property, which helps explain why lower LTV borrowing can cost less. HSBC's LTV explainer describes this relationship.
However, putting in another £1,000 only changes your product options if it brings you within a relevant limit. Moving from 74% to 73.6% might leave you in exactly the same pricing band.
Work Out the Gap to the Next Band
Multiply the accepted value by the target LTV as a decimal. Subtract that permitted borrowing from the mortgage you would otherwise need.
Suppose your home is valued at £280,000 and your remortgage balance will be £212,000:
- The current LTV is £212,000 ÷ £280,000 × 100, or about 75.71%.
- Borrowing at 75% is £280,000 × 0.75, or £210,000.
- Reducing the mortgage by £2,000 would bring the basic calculation to 75%.
This gives you a question to put to a lender or mortgage adviser: what would each eligible deal cost at £212,000 and £210,000 borrowing?
Do not round down your LTV to qualify. Even a small amount above the limit can matter. Ask how the lender treats any product fee added to the loan, and confirm the final balance and accepted valuation before relying on the calculation.
A Lower Valuation Can Change the Deposit Needed
An agreed purchase price does not guarantee the lender will value the property at that amount.
Take the earlier £250,000 purchase with £200,000 borrowing. If the lender's accepted value is £240,000, the LTV becomes about 83.33%. At an 80% lending limit, the maximum mortgage against £240,000 would be £192,000.
If the purchase price stays at £250,000, that leaves £58,000 to fund yourself, before purchase costs. That is £8,000 more than the original £50,000 deposit.
Your options might include negotiating the price, investigating a valuation challenge with evidence, considering an eligible higher-LTV product, or deciding the purchase no longer works. Read what to do if your mortgage valuation comes back low before committing extra savings.
Is It Worth Using Savings to Reach a Lower Band?
Compare actual quotes over the same period. A lower rate is only one part of the calculation: product fees, any early repayment charge, other switching costs and the remaining mortgage balance also affect the outcome.
For the £2,000 example, ask for illustrations using the same mortgage term and repayment basis. Check the cash paid upfront, monthly payments and balance remaining when the initial deal ends. Our guide to comparing two mortgage deals properly explains why the headline rate alone can mislead.
Then check where the £2,000 would come from. Money paid into the mortgage may be difficult to access again. You still need cash for moving costs, repairs, essential bills and unexpected expenses.
If you are reducing an existing mortgage before switching, check the overpayment allowance and any early repayment charge first. The timing can change the cost. See overpaying your mortgage versus saving for the wider trade-off.
A Good LTV Does Not Replace Affordability Checks
A large deposit does not establish that the repayments are affordable. Lenders also assess income, spending, other debts, credit history and their own criteria. MoneyHelper's affordability guide explains these separate checks.
If an application has failed despite a low LTV, adding more deposit may not address the reason. Start with mortgage declined on affordability: what to do next.
For a decision about your own borrowing, a regulated mortgage adviser can compare suitable options and explain the costs. Your home may be repossessed if you do not keep up repayments on your mortgage.
