Understanding Loan-to-Value (LTV) Ratio in Mortgages: A Complete Guide (2025)

Introduction: Why LTV Ratio Is One of the Most Important Mortgage Metrics

Whether you're buying your first home or remortgaging one of the most crucial figures your lender will assess is your Loan-to-Value (LTV) ratio .

Your LTV ratio determines:

• How much you can borrow

• What mortgage deals you’re eligible for

• Your interest rate and long-term affordability

• Whether your mortgage application is approved or declined

This guide will explain everything you need to know about the Loan-to-Value ratio how it’s calculated what a good LTV looks like in 2025 and how to reduce it for better borrowing power.

---

What Is Loan-to-Value (LTV) in a Mortgage?

Loan-to-Value (LTV) is the percentage of a property’s value that you’re borrowing via a mortgage. The remaining portion is covered by your deposit or equity.

LTV Formula:

LTV = (Mortgage Amount ÷ Property Value) × 100

---

Example:

• Property Price: £300 000

• Deposit: £30 000

• Mortgage: £270 000

LTV = (270 000 ÷ 300 000) × 100 = 90%

---

LTV Bands Used by UK Lenders (2025)

Lenders typically group LTV ratios into tiers each with different risk profiles and interest rates.

Most first-time buyers purchase with 90% or 95% LTV
Remortgagers often qualify for 60–75% LTV deals

---

Why LTV Ratio Matters

1. Interest Rates

Lower LTV = lower risk for the lender = lower interest rates .

Example: A 60% LTV deal may offer 4.25% while a 90% LTV deal may offer 5.85%.

---

2. Mortgage Product Availability

Many of the best mortgage products are reserved for LTVs of 75% and under . At higher LTVs your options may be limited especially during periods of market volatility.

---

3. Mortgage Approval

Lenders may decline high LTV applications if:

• You have poor credit

• You’re buying an unusual property

• Your income doesn’t pass affordability checks

---

4. Equity Risk

High LTV mortgages are more vulnerable to negative equity —when the mortgage is higher than the home’s market value. This can restrict your ability to remortgage or sell.

---

How to Reduce Your LTV Ratio

Save a Bigger Deposit

Even £5 000 more can drop you into a lower LTV band and unlock better rates.

Choose a Cheaper Property

If your deposit stays the same a lower-priced home reduces your LTV instantly.

Make Overpayments

If you already have a mortgage regular overpayments reduce your balance—and your LTV.

Wait for Market Appreciation

If your property value increases but your mortgage balance stays the same your LTV improves.

---

LTV Requirements for First-Time Buyers (2025)

As of 2025:

• 95% LTV mortgages are still available under the Mortgage Guarantee Scheme

• Lenders may require stronger credit scores and affordability checks at high LTV

• Government schemes like Shared Ownership and First Homes can reduce the borrowing needed improving effective LTV

---

LTV and Remortgaging

When remortgaging a low LTV (60–75%) significantly boosts your ability to access:

• Lower interest rates

• Better fixed-rate deals

• More flexible product terms

Tip: Revalue your home before remortgaging—if it’s appreciated your LTV will fall and your options may widen.

---

Risks of High LTV Mortgages

• Higher interest payments

• Limited lender choice

• More likely to fall into negative equity if property values fall

• Stricter eligibility checks

---

Final Word: Your LTV Ratio Is Key to Mortgage Success

Understanding your Loan-to-Value ratio is crucial when applying for a mortgage or remortgaging in the UK. It affects your interest rate lender choice and overall financial flexibility. A few small adjustments—like saving a little more or choosing a slightly cheaper property—can make a significant difference in your borrowing power.

Need help finding the right LTV band or mortgage deal?
Use the WiseNest Mortgage Affordability Tool to compare your options optimise your LTV and plan your homebuying journey with confidence.