It’s a common question for anyone applying for a mortgage. The answer can help you understand how much you might be able to borrow and what type of deal you could get. Eventually, you will learn what is the best way to move closer to a good loan to value ratio, which can lead to better options.
What does loan-to-value mean?
A loan to value (LTV) is the percentage that shows how much of the property’s value you’re borrowing. For example, if you want to buy a home worth £200,000 and borrow £160,000, your LTV is 80%.
Lenders use this number to understand the risk of lending. A lower LTV means you’re borrowing less, which is seen as lower risk.
If you’re new to the term, this breakdown of what is loan to value explains how it works when buying or remortgaging a home.
What is the maximum loan-to-value you can get?
Most lenders allow you to borrow up to 95% of a home’s value. This means you need at least a 5% deposit. In special cases, some may offer 100% mortgages, but only with extra requirements.
The maximum amount you can borrow depends on:
- Your income and spending
- Your credit history
- The type of property
- The lender’s own policies
Though rare, 100% mortgages still exist. Some require a guarantor, while others link the loan to savings held by a family member.
Does loan-to-value affect interest rates?
Yes, interest rates often change depending on your LTV. A lower LTV can 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.
If you’re unsure how to check your LTV, you can use tools designed to calculate loan to value based on your current property value and mortgage balance.
Can you get a 100% mortgage?
A 100% mortgage means you borrow the full value of the home without paying a deposit. These deals are rare but may be offered if you have a guarantor or meet strict lending rules.
They are often used by:
- First-time buyers with no deposit
- People with strong income and low debts
- Buyers who can offer savings through a family member
Even if these options are available, lenders still consider how risky the deal is. In many cases this can affect the rate they offer.
How does the loan-to-value ratio affect remortgaging?
When you apply for a remortgage, lenders look at how much of the loan you still owe and what your home is worth now. If the property value has increased or you’ve paid off a large part of the loan, your loan to value will be lower.
This can be a real advantage. A lower ratio often gives you access to better rates and more flexible deals. That’s why many people look closely at their loan to value remortgage options before renewing their mortgage term.
Even if you’ve not made big changes to your payments, rising house prices can help improve your LTV over time. You might be surprised how much this can affect your choices when switching to a new deal.
How do rising house prices impact the loan-to-value ratio?
House prices play a big part in your LTV. If your home goes up in value but your loan stays the same, your LTV will drop. This is helpful because:
- A lower LTV may unlock better interest rates
- It can improve your remortgage options
- It can make it easier to borrow more if needed
Let’s say your home was worth £200,000 and you owed £160,000, that’s an 80% LTV. If the home value rises to £220,000, your LTV drops to around 73%. This brings you closer to a good loan to value ratio, which many lenders reward with better terms.
Changes in property value don’t always happen quickly, but over time, they can help strengthen your position. If you’re unsure how your numbers look today, tools like online calculators can help you check.
When is your loan-to-value considered good?
What is a good loan to value ratio? Most lenders consider anything between 60% and 75% to be in the favourable range. This often leads to lower interest rates and more mortgage choices.
If your LTV is:
- Below 60%, you’re in a strong position and may get the best rates
- Between 60% and 75%, it is still very favourable with many good options
- Above 90%, you may face higher rates and fewer products
What matters most is that your LTV is moving in the right direction. The lower it is, the less risk the lender sees, so it’s worth reviewing your options early in the process.
How can mortgage brokers help?
If your loan to value is high or your financial situation is less straightforward, a mortgage broker can make the process easier. Brokers understand what lenders look for and can guide you to deals that match your LTV range.
Here’s how a broker can help:
- Compare lenders based on your current loan to value
- Explain which documents you’ll need
- Help you find lenders that accept high LTV applications
- Advise you if you’re applying for 100% mortgages or specialist products
- Save time by handling the paperwork and lender conversations for you
They also stay updated on lender criteria, which can be helpful if you’re looking at a loan to value remortgage and want to get the best rate available. Find a broker and ensure you find the best options relevant to your situation.
Final thoughts
Your loan to value ratio plays a key role in how lenders view your application. It affects your interest rates, loan options, and overall borrowing power.
Aiming for a good loan to value ratio, usually under 75%, can open up better deals and give you more choice. Whether you’re buying your first home or remortgaging, lowering your LTV can save you money in the long run.
If you’re unsure where to start, take the time to check your numbers, review your deposit, and speak with a broker if needed. As house prices change and you pay off your mortgage, your LTV will improve, and with it, your options.