Loan-to-value (LTV) explained
What LTV means, how to work it out, and why the bands decide the mortgage rate you are offered.
Loan-to-value (LTV) is how much you are borrowing as a percentage of the property's value. The sum is simple: LTV = loan ÷ value × 100. Borrow £225,000 to buy a £250,000 home and your LTV is 90%. It matters because lenders price mortgages in LTV bands, and a lower LTV usually means a cheaper rate.
The short version
- LTV is your loan as a share of the property value: loan ÷ value × 100.
- The rest is your deposit, or equity once you own the place: value minus loan.
- Lenders set rates in bands. A lower LTV usually gets you a cheaper rate and more deals to choose from.
- A bigger deposit, overpaying, or a rising property value can drop you into a cheaper band. Every figure here is a rough guide, not financial advice.
What loan-to-value means
Loan-to-value, almost always shortened to LTV, is the size of your mortgage measured against what the property is worth, written as a percentage. The part you are not borrowing is your deposit when you buy, or your equity once you own the place. So a 90% LTV means the loan covers 90% of the value and you hold the other 10%.
Lenders care about it because it tells them how much of the property the loan is riding on. A smaller loan against the same value is less of a risk to them, so they tend to offer their better rates to people borrowing a smaller share. That is the whole reason LTV is worth understanding before you apply.
The LTV bands
Lenders do not price every percentage point separately. They group LTVs into bands and set rates for each one. These are the bands we use, and what each tends to mean for the deals on offer.
| LTV band | What it usually means |
|---|---|
| Up to 60% | Best rates, widest choice of deals |
| 60% to 75% | Strong choice, very competitive rates |
| 75% to 80% | Good choice of deals |
| 80% to 85% | Decent choice of deals |
| 85% to 90% | Fewer deals, rates start to rise |
| 90% to 95% | Limited deals, higher rates |
| Above 95% | Very limited, only a few lenders |
Most UK mortgages sit somewhere between 60% and 95%. The biggest rate improvements tend to come as you cross the 90%, 85% and 75% marks, which is why the exact percentage can be worth a second look.
How to work out yours
Take the loan, divide it by the property value, and multiply by 100. Say you are buying a £250,000 home with a £25,000 deposit. You need to borrow the difference, £225,000. So your LTV is 225,000 ÷ 250,000 × 100, which comes to 90%. Your equity is the deposit, £25,000, the value minus the loan.
Now add a bit more deposit and watch the LTV fall. Put down £37,500 instead, and the loan drops to £212,500, an LTV of 85%. That nudge moves you out of the 85% to 90% band and into a cheaper one. You can run your own numbers with our loan-to-value calculator, which also tells you how much extra deposit it would take to reach the next band down.
Why the band sets your rate
A lower LTV means the lender has lent less against the same property, so if they ever had to sell it to get their money back, there is more room for the value to dip without leaving them short. Less risk for them usually means a lower interest rate for you, plus more deals to choose from.
Because the pricing works in bands, the difference is not smooth. Sitting at 91% LTV puts you in the 90% to 95% band, where deals are limited. Shaving that down to exactly 90% moves you into the band below, which can mean a noticeably better rate for what looks like a tiny change on paper. A lower rate feeds straight into a lower monthly payment, so it is worth seeing how the two connect in our guide to how mortgage repayments work.
How to drop into a cheaper band
There are three main ways your LTV falls:
- A bigger deposit. Putting down more when you buy shrinks the loan straight away. Even a small top-up can be worth it if it tips you over a band threshold.
- Overpaying the mortgage. Paying more than the lender asks for chips the balance down faster, so your LTV falls quicker than the schedule alone. See our guide to overpaying your mortgage for the limits and trade-offs.
- A rising property value. If the home is worth more than you paid, the loan is now a smaller share of a bigger number, so the LTV drops on its own. A falling value does the opposite.
If you are close to a threshold, it can be worth doing the sums before you commit. Our mortgage overpayment calculator shows how extra payments cut the balance over time, which is what moves your LTV between remortgages.
LTV when remortgaging
When you buy, your LTV is the loan against the purchase price. When you remortgage, it is the balance you still owe divided by the property's current value. Both of those usually move in your favour over a few years: the balance falls as you pay, and the value may have risen, so your LTV is often lower than when you started.
That is why people frequently get a better rate at their first remortgage than they did on the original deal. If years of payments, a spell of overpaying, or a rise in value have pushed you into a lower band, it is worth checking your figure before your current deal ends. Remember that on a purchase you usually pay Stamp Duty Land Tax on top of the price, which is separate from your LTV; our guide to how stamp duty works covers that.
Common questions
- What does loan-to-value (LTV) mean?
- Loan-to-value is how much you are borrowing as a percentage of the property's value. If you borrow £180,000 to buy a home worth £200,000, that is a 90% LTV. The other 10% is your deposit, also called your equity. Lenders use the figure to judge how much of the property the loan covers.
- How do I work out my loan-to-value?
- Divide the loan by the property value, then multiply by 100. So a £225,000 loan on a £250,000 home is 225,000 ÷ 250,000 × 100, which is 90%. Your deposit or equity is the value minus the loan, here £25,000.
- What is a good LTV ratio?
- Lower is better for the rate. Up to 60% usually gets you the best rates and the widest choice of deals, and 60% to 75% is still a strong position. From 85% upwards there are fewer deals, and above 95% they are very limited. Most UK mortgages sit between 60% and 95%.
- Does a bigger deposit lower my LTV?
- Yes. The deposit is the part of the price you are not borrowing, so a bigger deposit means a smaller loan and a lower LTV. Because lenders price in bands, a slightly bigger deposit can sometimes tip you into a cheaper band and a better rate.
- Does LTV change over time?
- Yes. On a repayment mortgage, every monthly payment chips away at the balance, so your LTV slowly falls. Overpaying speeds that up. If the property rises in value, your LTV falls too, because the loan is now a smaller share of a bigger number. A falling value works the other way.
- How does LTV affect remortgaging?
- When you remortgage, your LTV is the balance you still owe divided by the property's current value. If years of payments and any rise in value have pushed you into a lower band, you can often get a cheaper deal than when you first bought. It can be worth checking before your current deal ends.
About this article
Written by the calcd team. We build UK money calculators and explain the numbers behind them in plain English. Loan-to-value is plain arithmetic rather than a fixed rate, so there is no statutory figure to quote; we checked the general points and the band structure against MoneyHelper and UK lender explainers. The worked examples here are estimates to help you plan, not financial advice and not a mortgage offer. Your actual rate and the deals available depend on a lender assessing your circumstances. Last updated June 2026.