Your Loan-to-Value (LTV) is:

50%Based on a property value of £200,000 and a loan amount of £100,000 your loan to value is 50%

### Loan to Value (LTV) Graph

50% LTV

50%

# What is the Loan to Value (LTV) ratio?

Loan to Value (LTV) expresses the quantity of the property value that is mortgaged.

It is a ratio expressed as a percentage.

For example, if a lender offers you a mortgage deal with a maximum of 50% LTV. This means they will lend you up to half of the property value.

A 50% LTV Mortgage on the house valued at £200,000 will have a £100,000 mortgage and £100,000 deposit.

- Residential LTV's range up to 95%.
- Buy-to-Let LTV' s range up to 85%.

## What is a loan-to-value measured on?

Loan to value is based on two things:

- The Value of the Property.
- The Value of the Mortgage.

The percentage tells us how much of the "value of the property" is made up of the Mortgage Loan.

## Is LTV based on an appraisal?

Yes. To get a precise Loan-to-Value, you need to know the accurate value of the property. This is determined by a property survey by an RICS Property Surveyor.

Though your mortgage lender may use an Automated Valuation Model (AVM), an AVM is an estimate of a property value based on recent local sales.

You may estimate your Loan-to-Value by estimating the property value.

## What does 50% LTV mean?

50% LTV means that 50% of the property value is mortgaged. The other 50% is made up of your Deposit or Equity.

If your property is valued at £200,000. 50% LTV means that you will have a £100,000 mortgage on the property.

## What Loan-to-Value can I get?

In simple terms, the Loan-to-Value you can get is determined by how much deposit you have. If you only have 10% of the property value in savings to use as a deposit, you need 90% LTV.

Except if you can get 90%, Loan-to-Value depends on affordability. Suppose your income is enough to cover the mortgage payments. To determine this, you can use our Affordability Calculator.

# How do I calculate my LTV loan to value ratio?

You need to know (or estimate) the value of the property and the mortgage amount.

To find the Loan-to-Value (LTV), you divide the mortgage amount by the property value. Then multiply it by 100.

Mortgage Amount (divide) Property Value (times) 100 (equals) LTV

As an example if a property is worth £200,000 and you have a £100,000 mortgage:

£100,000 (divide) £200,000 (times) 100 (equals) 50% LTV

Or, you can use our Loan-to-Value (LTV) Calculator.

## Loan-to-Value (LTV) Calculation Formula:

- m = Mortgage Amount in Pounds (£)
- v = Property Value in Pounds (£)
- x = Loan to Value as a Percentage (%)

The formula for Loan to Value (LTV) is:

m (divide) v (times) 100 (equals) = x

If m (mortgage amount) is £100,000 and v (property value) is £200,000 the formula is:

£100,000 (divide) £200,000 (times) 100 = 50%

On a calculator:

100000 / 200000 * 100 = 50%

# What is a good Loan-to-Value ratio?

The lower your LTV, the more comprehensive your choice of mortgages will be.

A mortgage adviser will aim for you to have 0% LTV by the time you are retired. This means you are mortgage-free before ending your employment.

High Loan-to-Value (LTV) puts you at risk of your mortgage being higher than the property value if house prices decrease.

Low Loan-to-Value (LTV) puts you in much less risk and results in cheaper mortgage rates.

There is the view that:

- 0% LTV to 60% LTV is low risk
- 65% LTV to 85% LTV is medium risk.
- 85% LTV to 100% LTV is high risk.
- 100+% LTV is Negative Equity and should be avoided.

## What is the maximum loan to value ratio?

Before the 2008 house price crash it possible to get a mortgage higher than your property's value. One of the reasons for the crash.

Today on residential mortgages, you can get up to 95% Loan-to-Value (LTV) as a maximum. This is often with the help of the Governments Help-to-Buy Scheme.

Today on Buy-to-Let, it is more common to see mortgage lenders set a limit of 80% LTV. Though a few lenders do have 85% LTV Mortgages.

## How does LTV affect mortgage rates?

Yes. Mortgages operate in Loan-to-Value brackets, typically by 5% steps. The mortgage rates at 95% LTV are higher than those at 90% LTV and so on.

The lower your Loan-to-Value, the lower your mortgage rates will be.

## What are the LTV Brackets?

Mortgages operate in 5% steps, also known as LTV Brackets. We round up your Loan-to-Value (LTV) to the nearest 5%.

As such an LTV between 75.1% and 80% will be in the 80% Bracket, as we are rounding up. An LTV between 70.1% to 75% will be in the 75% Bracket.

Your mortgage adviser may advise increasing your deposit. This can help you go down an LTV Bracket. As the lower the LTV Bracket, the lower the mortgage rates.

# Does my Loan-to-Value (LTV) Change?

Yes, but the LTV is relevant when you take out the mortgage or come to remortgage.

If you are on a repayment mortgage, you are lowering how much you owe on a mortgage every month. As such, when you come to remortgage, you are at a lower Loan-to-Value.

Except...

Your house value can also change during that time. If House Prices increase then your Loan-to-Value (LTV) is lower, which is desirable. If the house price value decreases during that time, you can find your Loan-to-Value (LTV) is higher.

## How can I reduce my Loan-to-Value (LTV)?

### As a Buyer...

You can reduce your Loan-to-Value (LTV) by investing more of your savings. The larger deposit you can put down the lower your Loan-to-Value.

You can reduce your Loan-to-Value (LTV) by paying less for a home. Either find a cheaper property or negotiate with the seller for it to be cheaper. This way, more of the home's value will be covered by your deposit rather than the mortgage.

### As a homeowner...

You can reduce your Loan-to-Value by repaying more off your mortgage. If you are on a repayment mortgage, you are lowering your mortgage with every monthly payment.

If you have built up some savings, you can also reduce your LTV by paying a lump-sum off your mortgage. If you are in the introductory rate period, you have Early Repayment Charges (ERC). So homeowners often wait until its time to remortgage to a new rate.

You can reduce your Loan-to-Value by increasing the value of your home. This can occur naturally if house prices increase in your area.

Renovations can also increase the value, typically increasing the size of your home. Getting an extension or converting an attic into the living area.

# Loan-to-Value (TV) on Buy-to-Let Mortgages

If you are buying a property to live in, you can get up to 95% LTV. On buy-to-let mortgages, you can get a maximum Loan-to-Value of 85%.

On residential mortgages, how much you can borrow is restricted by personal affordability. On buy-to-let, the greatest you can borrow is limited by how much rent the property can achieve.