What is...


Loan to Value (LTV) is often used in mortgage lending to describe the ratio of the amount you’re looking to borrow to the property’s value. LTV can also be expressed as a percentage of the property’s value.

For example, if you’re looking at a property worth £200,000 and the mortgage lender only considers applications with a maximum Loan to Value of 90%, then you’ll only be able to borrow up to £180,000 (as this is 90% of £200,000). The gap between the amount you can borrow and total value of property is bridged by your deposit.

In general, the higher the LTV, the more costly the mortgage. This is because you are essentially looking to borrow more money (a larger loan) to pay for the property and the interest rate you qualify for will reflect this. The higher your deposit gets, the smaller your LTV becomes, and consequently your total mortgage amount and monthly payments are usually reduced accordingly.

How does LTV affect my mortgage agreement?

Higher LTVs typically mean that you’re borrowing more to purchase the property. As such, higher LTVs (and therefore lower deposits) result in higher monthly repayments or an extended mortgage term (from 25 years to 35, for example).

Having a certain LTV is by no means a guarantee of being accepted for a mortgage (as nothing guarantees this) but lenders are more confident to lend smaller amounts, as there is less risk involved, so you might find yourself eligible for more mortgage products and better deals the lower your LTV.

If you’re planning on applying for a mortgage soon, you’ll want to check your Credit Report first. Any mortgage lender is likely to scrutinise your Credit Report under a microscope - often at more than one Credit Reference Agency - looking for anything that might suggest you’re a ‘risky’ customer.

To see exactly what mortgage lenders will see should you apply, you can try the UK’s most detailed Credit Report with checkmyfile. Check your complete Credit Report data from Equifax, Experian and TransUnion, with checkmyfile free for 30 days. It’s then £14.99 per month and you can easily cancel at any time.

How is LTV calculated?

It is worked out as the mortgage amount compared to the value of the property at its present market value, as assessed by appraisal.

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