Mortgages
TL;DR
Loan-to-value (LTV) is the mortgage amount expressed as a percentage of the property value. A £150,000 mortgage on a £200,000 property is 75 percent LTV. Lenders price mortgages in LTV bands, with lower LTV attracting lower rates because the lender's risk decreases as the borrower's equity increases. Improving your LTV - by increasing the deposit, making overpayments or benefiting from house price growth - can move you into a lower rate band and reduce the total interest cost of the mortgage.
Key facts (2026)
- LTV is calculated as the mortgage amount divided by the lower of the purchase price and the property's surveyed value; lenders will not lend above the surveyed value even if the purchase price is higher (FCA MCOB lending standards).
- Most UK mortgage lenders offer their lowest rates at 60 percent LTV and below; rate tiers typically increase at 65, 70, 75, 80, 85, 90 and 95 percent LTV thresholds (standard lender pricing convention, 2026).
- At 95 percent LTV, the mortgage deposit required is 5 percent of the property value; at 60 percent LTV, the deposit required is 40 percent of the property value.
- The FCA requires lenders to conduct an independent valuation of the property before approving a mortgage; the mortgage is capped at the LTV limit applied to the lower of the purchase price and the surveyed valuation (FCA MCOB rules).
- When remortgaging, the LTV is calculated using the current market valuation of the property, not the original purchase price; house price appreciation since the original purchase reduces the LTV and may qualify the borrower for a lower rate band.
How LTV is calculated and why it matters
Loan-to-value is calculated by dividing the mortgage loan amount by the value of the property, then multiplying by 100 to express it as a percentage. If you are buying a property for £300,000 with a £30,000 deposit, your mortgage is £270,000 and your LTV is 90 percent (270,000 / 300,000 x 100). If the lender's surveyor values the property at £290,000 rather than the agreed purchase price of £300,000, the maximum mortgage at 90 percent LTV is £261,000 (90 percent of £290,000), leaving a larger gap for the buyer to fund from their own resources. LTV matters because it directly determines the rate category you access: lenders publish different rate tiers for different LTV bands, and moving from one band to a lower one - even by a small amount - can produce a meaningful reduction in the interest rate.
LTV pricing bands and the cost difference between them
Most mainstream lenders structure their mortgage product range around LTV pricing bands: 60, 65, 70, 75, 80, 85, 90 and 95 percent are the standard thresholds. The rate difference between adjacent bands reflects the lender's incremental credit risk. Moving from 90 percent to 85 percent LTV may reduce the mortgage rate by 0.2 to 0.5 percentage points depending on the lender and the prevailing market; moving from 75 percent to 60 percent can reduce the rate by 0.5 to 1 percentage point. On a £250,000 mortgage, a 0.5 percentage point rate reduction saves approximately £1,250 per year in interest. Calculating the breakeven point between a larger deposit (which reduces LTV and the rate) and the opportunity cost of deploying more cash into property is a useful exercise before finalising the deposit size.
Improving your LTV: deposit, overpayments and house price growth
There are three routes to a lower LTV: increasing the deposit at purchase, making overpayments during the mortgage term, and benefiting from house price appreciation between the original purchase and a remortgage. At purchase, a larger deposit directly reduces the LTV; saving a few extra months before completing can shift the LTV band, particularly near a threshold such as 85 percent or 75 percent. During the mortgage term, overpaying reduces the outstanding balance and therefore the LTV at remortgage. Most fixed-rate mortgages allow up to 10 percent of the balance per year in overpayments without penalty; tracker mortgages often have no limit. House price growth reduces LTV even without overpayments: a property purchased for £200,000 at 90 percent LTV (£180,000 mortgage) that rises to £230,000 in value gives an LTV of 78 percent at remortgage, potentially moving the borrower into the 75 percent rate tier.
LTV and remortgaging: using equity wisely
When you remortgage, the lender uses the current market value of the property to calculate the new LTV. If property values have risen since the original purchase, the LTV falls even if the outstanding balance has not changed significantly. This is one of the principal financial benefits of rising house prices for existing homeowners: better mortgage rates on remortgage. The new LTV calculation is based on a formal valuation commissioned by the new lender - some lenders offer free automated valuations; others require a physical surveyor visit, particularly for higher LTV applications or non-standard property types. Where remortgaging involves releasing equity (increasing the mortgage), the LTV increases, potentially moving the borrower into a higher rate band; the trade-off between accessing cash and paying a higher rate needs to be assessed carefully.
High LTV mortgages: 90 and 95 percent options
Mortgages at 90 and 95 percent LTV are available but carry a meaningful rate premium over lower LTV products. At 95 percent LTV the deposit is just 5 percent of the purchase price, which reduces the barrier to homeownership but increases the monthly payment relative to a lower-LTV mortgage because of both the larger loan and the higher rate. At 95 percent LTV there is also a greater risk of falling into negative equity - where the outstanding mortgage balance exceeds the property value - if house prices fall by more than 5 percent. This risk is most acute in the first few years of the mortgage when capital repayments are small and the principal balance remains close to the purchase price. If you anticipate a house price fall, a 95 percent LTV mortgage provides minimal financial buffer.
LTV and mortgage insurance
In some other countries, mortgages above 80 percent LTV require the borrower to pay private mortgage insurance (PMI). In the UK, there is no equivalent product; lenders price their risk entirely through the interest rate rather than requiring a separate insurance premium. However, lenders above certain LTV thresholds (typically 85 or 90 percent) may use their own mortgage indemnity guarantee (MIG) arrangements with reinsurers - but the cost, if any, is typically borne by the lender and absorbed into the rate rather than charged separately to the borrower. Some older mortgages, particularly those originated before 2000, did include visible MIG charges; these are no longer standard in the modern UK mortgage market.
Related guides
- Best mortgage rates UK 2026
- Fixed vs variable mortgage UK
- Help to Buy UK 2026 guide
- All Mortgage guides →
Frequently asked questions
What happens if the surveyor values the property below the purchase price?
If the surveyor's valuation is below the agreed purchase price, the lender calculates the mortgage against the lower surveyed value. This creates a funding gap: the buyer must make up the shortfall from their own resources or renegotiate the purchase price downward. A down-valuation of £10,000 on a 90 percent LTV mortgage means the buyer needs an additional £9,000 in cash (90 percent of the gap). Buyers can challenge a down-valuation by providing evidence of comparable recent sales in the area; the lender's valuer has a process for reviewing formal challenges.
Can I get a mortgage above 95 percent LTV in the UK?
No, 95 percent LTV is the effective ceiling for residential mortgage lending in the UK. The FCA's responsible lending rules and lenders' own credit policies prevent lending above this level. Some family-assisted schemes allow parents to use savings or property equity to support an application effectively at a lower LTV from the lender's perspective, but the borrower's direct contribution plus the family support combined must still demonstrate adequate equity to satisfy the lender's risk requirements.
Does my LTV affect how much I can borrow?
LTV determines the maximum loan as a percentage of the property value. The actual amount you can borrow is subject to both the LTV cap and the affordability assessment - whichever is more restrictive. A borrower with a 90 percent LTV at 4.5 times income will be constrained by the income multiple before the LTV limit if the property value is modest. A borrower with a large income buying a very high-value property may be constrained by the LTV cap rather than the income multiple.
How does shared ownership affect LTV?
In a Shared Ownership purchase, the LTV is calculated on the share being purchased, not the full property value. If you purchase a 40 percent share of a £300,000 property (£120,000), your mortgage is against that £120,000 share value. A 90 percent LTV mortgage on a 40 percent share would be £108,000, with a £12,000 deposit. This makes the entry cost significantly lower than an outright purchase at the same LTV, which is one of the scheme's principal financial attractions.
When is LTV recalculated?
LTV is formally recalculated at two points: at the point of mortgage application (purchase or remortgage), based on the current valuation; and informally by the borrower at any time using the current outstanding balance and an estimated property value. Between formal valuations, the LTV changes as the outstanding balance reduces through capital repayments and as property values change. At remortgage, the lender conducts a fresh formal valuation and the new LTV determines which rate tier the borrower accesses.
How we verified this guide
LTV pricing band conventions were verified against published product ranges from major UK mortgage lenders in April and May 2026. FCA valuation and LTV lending rules were confirmed from the FCA's MCOB sourcebook. Shared Ownership LTV calculation methodology was cross-referenced with Homes England guidance.
Primary sources
- FCA - Mortgage regulation and consumer guidance
- Bank of England - Mortgage market data
- MoneyHelper - Loan-to-value explained
- Citizens Advice - Mortgages guidance
- Financial Ombudsman Service - Mortgage complaints
Last reviewed: May 2026.
