When applying for a mortgage, one of the most important numbers to know is your loan to value ratio (LTV). It helps lenders assess how much risk they’re taking by offering you a loan, and it can directly impact the deals you’re offered.

Your mortgage loan to value ratio is the percentage of your property’s value that you want to borrow. For example, if your home is worth £200,000 and you borrow £150,000, your LTV is 75%. The higher the LTV, the smaller your deposit, and vice versa. Understanding how this figure works gives you better control over your mortgage options and helps you plan ahead.

Why do I need to know my LTV?

Knowing your LTV helps you figure out how much you may be able to borrow, how big your deposit should be, and the kind of mortgage rates you might access.

Lenders look at your mortgage loan to value ratio to assess risk. The lower your LTV, the lower the risk, often leading to better interest rates and more options.

If you don’t yet know your percentage, calculate your loan to value by inputting your property value and loan amount into a calculator.

What are the benefits of a lower LTV?

A lower LTV can give you access to more competitive mortgage deals. Lenders often reserve their best rates for borrowers with the lowest LTVs, as these loans carry less risk.

Here are some key benefits of keeping your loan to value ratio as low as possible:

  • Lower interest rates: A smaller loan means lenders can offer you better deals
  • Higher chance of approval: Your application may be more attractive to a wider range of lenders
  • More equity from the start: You’ll own a bigger share of your home from day one

Keeping your deposit as high as possible is a simple way to reduce your LTV and strengthen your mortgage application.

What are the risks of a higher LTV?

A higher mortgage loan to value ratio means borrowing a larger share of your home’s value. This increases the lender’s risk and often leads to higher interest rates.

It also means you have less equity in your home, so if property prices fall, there’s a risk of owing more than your home is worth (known as negative equity). That’s why it’s helpful to understand your LTV before applying.

Does loan-to-value affect mortgage interest rates?

Yes, interest rates often change depending on your LTV. A lower LTV may help you get:

  • Lower interest rates
  • A wider choice of lenders
  • More flexible deals

This is because borrowing less against your home lowers the lender’s risk. On the other hand, high LTV loans may cost more.

Getting your LTV down is a good way to move closer to a good loan to value ratio mortgage, which can lead to better options.

What is the maximum LTV a mortgage lender will allow?

The maximum LTV a lender offers usually depends on the type of mortgage and your financial situation. Many lenders offer mortgages up to 90% or 95% LTV, especially for first-time buyers.

However, the higher the LTV, the stricter the checks. You may need:

  • A strong credit history
  • Stable income
  • Low levels of existing debt

Some specialist lenders may also consider 100% LTV mortgages in specific cases, such as guarantor mortgages. But these are rare and carry more risk.

It’s important to remember that the higher your mortgage loan to value ratio, the fewer deals you’ll likely find, and the higher your monthly payments may be.

Which loan-to-value ratio should I choose?

There’s no one-size-fits-all answer, but many lenders view a loan to value ratio of between 60% and 75% as a good mortgage. This range typically offers better interest rates and more options.

If your LTV is:

  • Below 60%: You’re likely to get the best mortgage deals
  • Between 60% and 75%: Still very competitive rates and good options
  • Between 75% and 85%: Fewer lenders and slightly higher rates
  • Above 90%: Limited deals and stricter requirements

Your goal should be to reduce your LTV as much as possible, either by saving a larger deposit or by choosing a property within your budget.

Speak to a mortgage broker

Understanding your mortgage loan to value ratio is only part of the picture. A mortgage broker can look at your full financial situation and help match you with lenders who suit your needs.

Brokers can:

  • Help you compare deals based on your LTV
  • Explain how deposit size affects your monthly payments
  • Guide you if your credit history isn’t perfect
  • Suggest ways to improve your LTV over time

Since your LTV affects so many parts of the mortgage process, getting the right advice early can make a big difference. Whether you’re a first-time buyer or looking to remortgage, brokers can help you make better decisions and avoid costly mistakes.

Final thoughts

Understanding your loan to value ratio mortgage is key when planning to buy a home. It directly affects how much you can borrow, the interest rate you’ll receive, and the type of mortgage deals available to you. A lower LTV often puts you in a stronger position with lenders, offering better rates and more flexibility. On the other hand, a higher LTV might mean paying more in interest and having fewer options to choose from. Taking the time to understand your LTV can make a big difference in your mortgage journey. For many buyers, it’s the first step to making informed decisions.