How it works
What LTV means and why it matters
Loan-to-Value (LTV) is the ratio of your mortgage to the value of the property, expressed as a percentage. It is one of the most important numbers in mortgage lending because it tells lenders how much of the property you are financing versus how much you own outright.
Formula: LTV% = (Loan ÷ Property Value) × 100. Your deposit percentage is simply 100 minus your LTV. So a 10% deposit gives 90% LTV; a 25% deposit gives 75% LTV.
LTV matters because it determines your interest rate, which lenders will consider your application, and how easily you can remortgage in the future. Every mortgage rate is priced at a specific LTV tier — the lower your LTV, the less risk the lender takes on, and the better the rate they offer.
LTV also changes over time as you repay your mortgage and as property values change. A buyer who started at 95% LTV in 2021 may find themselves at 75–80% LTV by 2026, depending on capital repayments and local house price movements. Use our remortgage calculator to see whether a better LTV now qualifies you for a lower rate.
How LTV affects your mortgage rate
Mortgage pricing in the UK is tiered by LTV. Moving from one tier to the next — say from 85% to 80% LTV — typically unlocks a meaningfully lower interest rate, even if the absolute LTV drop is only 5 percentage points.
The pricing differential between tiers is not uniform. The biggest jumps in rate tend to occur between 85–90% LTV and 90–95% LTV, where lender risk increases most sharply. Between 60% and 75% LTV the gap is relatively modest.
Even a small increase in deposit can push you across a tier threshold. On a £280,000 property, the difference between an 85% LTV (£238,000 mortgage, £42,000 deposit) and 80% LTV (£224,000 mortgage, £56,000 deposit) is £14,000 in deposit but could save 0.3–0.5% in interest rate — worth roughly £700–£1,100/year.
| LTV tier | Deposit on £280k property | Approximate rate | Monthly payment (£280k, 25yr) | vs 60% LTV |
|---|---|---|---|---|
| 60% LTV | £112,000 (40%) | ~4.00% | ~£921 | Benchmark |
| 75% LTV | £70,000 (25%) | ~4.15% | ~£946 | +£25/mo |
| 80% LTV | £56,000 (20%) | ~4.35% | ~£971 | +£50/mo |
| 85% LTV | £42,000 (15%) | ~4.55% | ~£998 | +£77/mo |
| 90% LTV | £28,000 (10%) | ~4.90% | ~£1,044 | +£123/mo |
| 95% LTV | £14,000 (5%) | ~5.40% | ~£1,126 | +£205/mo |
LTV tiers and how lenders use them
UK mortgage lenders publish rate grids that show different rates at each LTV tier. The standard tiers are 60%, 65%, 70%, 75%, 80%, 85%, 90% and 95%. Rates are better (lower) as you move down through the tiers.
When you apply for a mortgage, the lender assesses both the purchase price and — crucially — the surveyor's valuation. If the valuation comes in below the purchase price, your effective LTV is higher than you planned. For example: agreed purchase price £300,000 at 90% LTV (£270,000 mortgage). Surveyor values at £285,000 → effective LTV = 94.7%, pushing you into the 95% tier.
For remortgages, the lender uses a new valuation of your home rather than the original purchase price. If property values in your area have risen, your LTV may be much better than when you bought — potentially moving you into a significantly cheaper rate tier.
95% LTV mortgages are available under the Mortgage Guarantee Scheme, but the rate premium is significant. For most buyers, saving to reach 90% LTV saves enough in interest to be worth the extra few months of saving time.
Key LTV thresholds to know
- 60% LTV — best available rates across all major lenders
- 75% LTV — good rates, accessible to buyers with 25% deposit
- 80% LTV — modest rate premium; first significant threshold for many buyers
- 85% LTV — higher premium; lenders more selective
- 90% LTV — significant premium; limited lender choice
- 95% LTV — highest rates; Mortgage Guarantee Scheme products only at many lenders
How LTV changes over time
LTV is not fixed — it changes as you make mortgage repayments and as your property's value fluctuates. On a standard repayment mortgage, each monthly payment reduces your outstanding balance (initially slowly, accelerating over time as the interest component shrinks).
House price movements also affect LTV independently of your repayments. If you bought a home at £250,000 with a £225,000 mortgage (90% LTV) and the property is now worth £290,000, your LTV has fallen to approximately 77.6% — even if you have only paid off a small amount of the mortgage.
To calculate your current LTV: divide your outstanding mortgage balance by the current estimated value of your home, then multiply by 100. Estate agents can give you a free estimated value; a formal RICS valuation provides the most accurate figure.
Tracking your LTV over time matters because it tells you when you might cross into a better rate tier at remortgage. If you are at 81% LTV and a six-month overpayment could push you to 79.5%, it may be worth making that payment to access 80% LTV pricing.
How to improve your LTV
There are two ways to improve your LTV: increase the numerator's denominator (property value) or reduce the numerator (loan size). In practice, the most controllable lever is paying down the mortgage.
Overpayments are the most direct route. Most mortgages allow annual overpayments of up to 10% of the outstanding balance without triggering an ERC. A £10,000 overpayment on a £200,000 balance reduces your LTV by five percentage points — potentially pushing you across a rate tier boundary at your next remortgage.
Home improvements can increase your property's value, which also reduces LTV — though this is less predictable and takes time for the market to recognise. A new kitchen, extension or energy efficiency improvements (insulation, heat pump) are most likely to add value.
Rising house prices in your area passively reduce your LTV. In areas with strong price growth, some homeowners find their LTV drops substantially between purchase and remortgage without any overpayments at all.
Ways to reduce your LTV before remortgaging
- Make annual overpayments (up to 10% of balance per year, ERC-free on most deals)
- Use a savings lump sum to reduce the balance at remortgage
- Benefit from property value growth in your area (get a free estate agent valuation)
- Invest in value-adding home improvements (kitchen, extension, energy efficiency)
- Consider offset mortgage if you have significant savings (offsets balance, reducing effective LTV)
LTV vs debt-to-income ratio — understanding both metrics
LTV and debt-to-income (DTI) ratio are related but distinct measures that lenders use for different purposes. LTV measures the security of the loan — how much of the property the lender would recover if you defaulted. DTI measures your ability to service the debt from your income.
You could have an excellent LTV (say 60%) but still be declined if your DTI is too high — for example, if you have large car finance payments, credit card debt or already carry multiple mortgages. Conversely, a high LTV (90–95%) can be offset by a very low DTI, strong income and clean credit history.
Lenders typically want DTI below 40–45% (total monthly debt payments as a percentage of gross monthly income). The FCA's affordability rules require lenders to assess both. See our mortgage affordability calculator to understand how DTI affects your borrowing capacity.
For buy-to-let mortgages, lenders use a different metric — the rental coverage ratio (rental income as a percentage of mortgage payment, typically requiring 125–145%). See our rental yield calculator for how rental income interacts with BTL mortgage requirements.