Loan-to-value (LTV) explained: why it changes your rate

Loan-to-value, or LTV, is the size of your mortgage as a percentage of your property's value. It's one of the biggest factors in the rate you're offered: the more equity you have, the less risk the lender takes, and the cheaper the deal tends to be.

How to work out your LTV

Divide your mortgage balance by the property's value, then multiply by 100.

• Borrowing £180,000 on a £240,000 home: 180,000 ÷ 240,000 × 100 = 75% LTV.
• Buying with a 10% deposit means a 90% LTV; remortgaging with 40% equity means 60% LTV.

Why rates are priced in bands

Lenders don't price every percentage point separately — they set rates for bands such as 60%, 75%, 85%, 90% and 95%. Your rate is set by the band you fall into, so being at 76% instead of 75% can put you in a noticeably more expensive band.

How to move into a cheaper band

• Your repayments: on a repayment mortgage every payment reduces the balance, so your LTV falls over time.
• Your home's value: if prices have risen, a fresh valuation at remortgage can lower your LTV.
• Overpaying: if you're just above a band, a lump-sum overpayment before you remortgage (within your deal's overpayment allowance) can move you into the next one down.

If property values fall, the reverse can happen — your LTV rises, and in a severe case the balance can exceed the home's value (negative equity), which limits your options.

Compare today's rates at 60%, 75% and 90% LTV, or use the affordability calculator to see where a purchase would land.

This is general information, not mortgage advice.