What is loan to value ratio and how do I calculate it?

Loan to value ratio (LTV) is the percentage of your property’s value that you’re borrowing as a mortgage. It’s one of the most important factors lenders consider when deciding whether to approve your mortgage and what interest rate to offer you.

For example, say you’re buying a house worth £300,000, you have a deposit of £30,000 and need to borrow the remaining £270,000 from your chosen lender. Your deposit covers 10% of the house price. The remaining 90% is your loan to value.

LTV ratio helps lenders assess the risk of lending to you. The lower your LTV ratio, the less risky you appear to lenders, which typically means access to better mortgage rates and more product options.

If you’re remortgaging, your LTV is calculated using your current outstanding mortgage balance against your property’s current market value, not what you originally paid for it.

Let’s look at an example, if your home is now worth £350,000 and you still owe £175,000 on your mortgage, your LTV would be 50%. This is often much better than when you first bought, thanks to paying down your mortgage and potential property price increases.