Agreement in Principle
A lender’s early indication of how much you might be able to borrow.
Read term →What is Loan-to-Value?
Loan-to-value, usually shortened to LTV, shows how much of a property’s value is covered by the mortgage.
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Definition
Loan-to-value is the mortgage amount divided by the property value, shown as a percentage.
Loan-to-value in plain English
LTV tells you how much of the property is funded by borrowing. If you buy a £300,000 property with a £270,000 mortgage, your LTV is 90%. The remaining 10% is your deposit.
If you already own the property, LTV compares your current mortgage balance with the current property value. The part not covered by the mortgage is your equity.
Loan-to-value formula
The calculation is simple: divide the mortgage by the property value, then multiply by 100.
LTV = mortgage amount ÷ property value × 100
If the mortgage is £270,000 and the property value is £300,000:
£270,000 ÷ £300,000 × 100 = 90%
Loan-to-value examples
90% LTV
£270,000 mortgage on a £300,000 property.
75% LTV
£300,000 mortgage on a £400,000 property.
50% LTV
£125,000 mortgage on a £250,000 property.
Calculate your LTV
Use the Loan-to-Value Calculator to work out LTV from property value, loan amount or deposit.
Why LTV matters
LTV matters because lenders use it to understand how much risk is attached to the mortgage. A lower LTV usually means the borrower has a larger deposit or more equity in the property.
Mortgage deals are often priced around LTV bands. A borrower at 60% LTV may see different deals from a borrower at 90% or 95% LTV.
Simple idea: lower LTV usually means more deposit or equity. Higher LTV usually means less deposit or equity.
Common LTV bands
Lenders and comparison sites often group mortgage deals by LTV bands. The exact bands and rates depend on the lender, product and market conditions.
| LTV band | What it usually means | Deposit or equity position |
|---|---|---|
| 60% LTV or lower | Lower-risk lending band | At least 40% deposit or equity |
| 75% LTV | Common mid-to-low LTV band | 25% deposit or equity |
| 85% LTV | Common buyer and mover band | 15% deposit or equity |
| 90% LTV | Higher LTV but still common | 10% deposit or equity |
| 95% LTV | High LTV lending | 5% deposit or equity |
| Over 100% LTV | Negative equity | Mortgage is higher than property value |
What can change your LTV?
LTV changes when either the mortgage balance changes or the property value changes.
- Making mortgage repayments: reduces the mortgage balance over time.
- Making overpayments: can reduce the balance faster.
- Property value rising: can lower LTV if the mortgage balance stays the same.
- Property value falling: can increase LTV and may create negative equity.
- Borrowing more: can increase LTV if you take additional borrowing secured on the property.
Important: lenders usually use their own property valuation when assessing LTV, not just your estimate or the asking price.