What Is Loan-to-Value (LTV)? A Simple Guide for First-Time Buyers

LTV. Three letters. Zero explanation.
If you’ve been mortgage-hunting for more than five minutes, you’ve seen this term
everywhere and understood none of it.
Good news: it’s actually dead simple.
LTV stands for Loan-to-Value. It tells you how large your mortgage is compared with the
value or purchase price of the property used by the lender.
And it’s one of the most useful mortgage terms for a first-time buyer to understand.

How does LTV work?

Imagine you’re buying a home for £200,000.
You have a £20,000 deposit.
That means you need a mortgage of:
£180,000
You’re borrowing 90% of the £200,000 purchase price.
Your mortgage is therefore approximately:
90% LTV
Put another way:
10% deposit = 90% mortgage = 90% LTV

How do I calculate LTV?

The basic calculation is:
Mortgage amount ÷ property value × 100 = LTV
For example:
£180,000 ÷ £200,000 × 100 = 90%
So the LTV is 90%.

Deposit and LTV work in opposite directions

This is the easiest way to remember it.
As your deposit gets bigger, your LTV gets smaller.
Here’s the full picture:
Deposit Mortgage LTV
5% 95% 95%
10% 90% 90%
15% 85% 85%
20% 80% 80%
25% 75% 75%
40% 60% 60%
So if someone tells you they’ve got a 10% deposit, they’re basically saying “I need roughly a
90% LTV mortgage.” Same thing, different words.

Okay, but why does LTV actually matter?

Because lenders don’t offer one flat deal to everyone.
They offer different products at different LTV levels.
You’ll see mortgages labelled things like:
95% LTV
90% LTV
85% LTV
80% LTV
75% LTV
Generally, the lower your LTV, the more of the property you actually own outright compared
to what you’re borrowing.
And different LTV bands can come with different rates and different product choices.

Does a lower LTV get me a better rate?

Often, yes. Lenders price things partly on risk. LTV is one of the big factors in that. So what’s on offer at 90% LTV might look quite different from what’s on offer at 95%. Drop to 85%, and you might unlock a whole new set of products again. But don’t assume hitting a certain LTV automatically means a certain rate. Mortgage pricing shifts all the time. Always check what’s actually available when you’re ready to buy.

A quick example

Say you’re buying a £300,000 home. Here’s how three different buyers might look:
Option A Deposit: £15,000 Mortgage: £285,000 LTV: 95%
Option B Deposit: £30,000 Mortgage: £270,000 LTV: 90%
Option C Deposit: £45,000 Mortgage: £255,000 LTV: 85%
Same house. Same £300,000 price tag. But three completely different LTVs, and potentially
three completely different sets of mortgage options.

Does LTV decide how much I can borrow?

Not on its own. This bit trips people up.
LTV just tells the lender the size of your mortgage relative to the property.
Affordability is a separate question entirely: can you actually afford the repayments?
You could have a huge deposit and still fail an affordability check.
Or your income could easily support a bigger mortgage, but you just don’t have enough
deposit to hit the LTV you need.
Both things have to line up:
Affordability + the right LTV. You need both.

What if the lender values the house lower than my offer?

This is where LTV gets real.
Say you agree to pay £250,000. But the lender’s own valuation comes back lower.
The lender bases its decision on their valuation, not your agreed price.
A lower valuation can push your effective LTV up, and might mean the lender won’t lend as
much as you expected.
This is called a “down valuation.”
If it happens, you’ve got options: renegotiate the price, stump up more deposit yourself, or
reconsider the purchase altogether. Depends on your situation.

Does my LTV change after I’ve actually bought the place?

Yep, it moves. Two reasons:
1. Your mortgage balance shrinks.
Pay off a repayment mortgage month by month, and your balance drops. That alone brings
your LTV down over time.
2. The property’s value shifts.
Prices go up. Prices go down. Simple as that.
So if your balance drops while the value climbs, your LTV improves.
But if prices fall, your LTV can actually get worse, even without you doing anything wrong.

Why should I care about LTV again in the future?

Because it’s not a one-time thing.
When your first mortgage deal ends and you remortgage, LTV comes right back into play.
By then you’ll likely have paid down some of your balance, and the property’s value may
have moved too. That could land you in a completely different LTV band than when you
started.

Quick-fire FAQs

What does 90% LTV mean? Your mortgage covers 90% of the property’s value. You’re providing the other 10% yourself, through deposit or equity.

What LTV is a 5% deposit? Roughly 95% LTV.

What LTV is a 10% deposit? Roughly 90% LTV.

Is a lower LTV always better? It means you’re borrowing less relative to the house. Can open up better products and rates. But whether a bigger deposit is the right move for you depends on your whole situation.

Should I dump all my savings in to lower my LTV? Not automatically. Remember buying and owning a home costs extra. Keep something back.

The easiest way to remember LTV

Picture a £100 property.
Borrow £95? That’s 95% LTV.
Borrow £90? 90% LTV.
Borrow £75? 75% LTV.
That’s genuinely all LTV is.
Get comfortable with it now, because you’ll see this term everywhere throughout your
home-buying journey — deposits, mortgage products, rates, all of it ties back to LTV.

This is general info, not personal financial advice. Lending criteria, rates and product availability change and vary between lenders and individual circumstances. Property values can fall as well as rise. Your home may be repossessed if you don’t keep up mortgage repayments.