What is loan to value (LTV)?

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Loan to value (or LTV for short) is a percentage of how much you've borrowed as a mortgage compared to the value of your property.

How do you work out your LTV?

If you’re buying a house for £200,000 and you’ve saved a £40,000 deposit, you’ll need to borrow £160,000. That means your LTV is 80% (because £160,000 is 80% of £200,000).

Why does your LTV matter?

The bigger your deposit, the lower your LTV. And if you have a lower LTV, you’ll usually have access to better mortgage deals. That’s because lenders see lower LTVs as less risky. If house prices were to fall, someone with a low LTV is less likely to fall into negative equity.

LTVs are usually banded in 5% increments, for example 95%, 90%, 85%, 80% and so on. Each step down usually opens up better interest rates, so even a small increase in your deposit might make a difference if it places you into a lower LTV band.

If house prices go up, this can also help to reduce your LTV.