When you're mortgage shopping, a lot of the jargon is honestly just made-up sounding words for sensible things. Loan-to-Value — usually shortened to LTV — is one of them. Once you get it, a surprising amount of other mortgage stuff clicks into place.
What does LTV actually mean?
LTV is the size of your mortgage as a percentage of the property's value. If that makes your head explode, think of it this way; it's how much you put in and how much you will borrow. I like to think of it like slices of pie. I'll eat this much, the bank will eat the rest.
If you're buying a home worth £300,000 and you have a £60,000 deposit, you need to borrow £240,000. Divide £240,000 by £300,000, multiply by 100, and you get 80%. That's an 80% LTV mortgage. So, you're eating 20% when you pay your deposit, the bank is eating 80%. I'm getting hungry talking about pie...
Quick note: your mortgage can't cover stamp duty or moving costs, so you'll need some cash set aside for those on top of your deposit.
Why lenders care about it
LTV is essentially a risk signal. The more of the property the lender is financing, the more exposed they are if things go wrong — if you can't repay, or if house prices fall and the property is worth less than what they lent you.
This is why LTV affects your mortgage in three pretty direct ways.
Interest rates. The lower your LTV, the less risk the lender takes on, and they reward that with better rates. Lenders price mortgages in bands — typically at 95%, 90%, 85%, 80%, 75%, 70%, 60% — and each band down can unlock meaningfully cheaper deals.
Choice of deals. Right now, 90% and 95% LTV mortgages are at a 17-year high in terms of product availability, which is genuinely good news for buyers with smaller deposits. But higher LTV products still represent only about 19% of the market. The bulk of competitive deals sit in the 60-85% range.
Eligibility. Higher LTV mortgages often come with stricter affordability checks. A 95% mortgage typically requires a cleaner credit history and solid proof of income. Lenders are taking more risk, so they want more reassurance.
Which LTV band should you aim for?
There's no single right answer — it depends on your savings, the property price, and how quickly you want to buy. But here's roughly how the bands work:
| LTV band | Deposit needed | Rate tier | Typical situation |
| Below 60% | 40%+ | Best rates, widest choice | Remortgaging with built-up equity |
| 60–75% | 25–40% | Very competitive | Buyers with a meaningful deposit |
| 75–85% | 15–25% | Rates nudge up, still good | Most common for first-time buyers |
| 85–90% | 10–15% | Higher rates, fewer deals | Achievable with a 10% deposit |
| 90–95% | 5–10% | Most expensive, stricter criteria | 95% deals at highest availability since 2008 |
As a rough guide, crossing down through the 75% band tends to unlock a noticeable rate improvement. If you're close to it, it's worth doing the maths on whether saving a bit longer actually saves you money in repayments.
What about negative equity?
This is the risk that comes with a high LTV — particularly at 90-95%. If property values fall and your mortgage balance is higher than the property's market value, you're in negative equity. You don't owe the lender the difference day-to-day, but you can't sell without covering the gap from your own pocket, and remortgaging becomes very difficult.
It's not inevitable, and UK house prices have historically trended upward over the long run. But it's worth understanding the exposure before stretching to a 95% deal.
How to lower your LTV (and why it matters when remortgaging)
Your LTV changes over time. As you repay your mortgage and as your property value (hopefully) rises, your LTV falls. This is why remortgaging every few years can unlock better rates — you're in a different band than when you took the original deal out.
To actively improve your LTV:
- Save a larger deposit before buying
- Overpay your mortgage if your deal allows it
- Wait for the property to increase in value (less in your control, but real)
If you're close to a key band — say you're at 81% and could get to 80% — it can be worth the extra saving time.
A worked example
You're buying a £250,000 flat. You've saved £25,000.
The difference in monthly repayments depends on current rates, but over a 25-year mortgage, even a 0.3% rate improvement can mean thousands saved.
The honest summary
LTV isn't something to fear — it's just a useful lens for understanding where you sit as a borrower and what it costs you. The lower your LTV, the better your rates and the more choice you have. The higher it is, the more you'll pay, and the more exposed you are to market wobbles.
If you're not sure which LTV band you're in or what deals you'd actually qualify for, a mortgage broker can give you a clearer picture than any online calculator. Unbiased matches you with independent, FCA-regulated advisers who can give you advice based on your actual situation — not a generalised guide on the internet.
As with all financial decisions, your individual circumstances matter. This post is for information only — not financial advice.
Also on Femme Finance:
- What mortgage can I get on my salary?
- The single applicant's guide to getting a mortgage
- How to get a mortgage when you're self-employed
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