Finance⏱ 5 min read
How to Calculate Loan-to-Value Ratio and Why It Matters
LTV determines the interest rate you can access on a mortgage. Crossing a key LTV threshold can save hundreds per month. Here is the calculation and the thresholds that matter most.
Loan-to-Value is the mortgage amount as a percentage of the property value. It's the single number lenders care most about — it determines your interest rate tier, your product availability, and your monthly payment.
The LTV Calculation
LTV % = (Mortgage amount / Property value) x 100
Example 1: Buying with a deposit
Property price: £280,000
Deposit: £42,000 (15%)
Mortgage: £238,000
LTV: (238,000 / 280,000) x 100 = 85%
Example 2: Remortgaging
Property now valued at £350,000
Remaining mortgage: £190,000
LTV: (190,000 / 350,000) x 100 = 54.3%
Equity = 100% - LTV% = 45.7%
Key LTV Thresholds and Rate Tiers
LTV BandProduct AvailabilityRate Premium (vs 60% LTV)
60% and belowBest rates available0% (reference rate)
61-75%Good rates+0.1-0.3%
76-80%Standard rates+0.3-0.5%
81-85%Limited products+0.5-0.8%
86-90%Higher rate products+0.8-1.2%
91-95%Very limited, higher rates+1.0-1.5%
Monthly Payment Impact of Crossing a Threshold
Mortgage £200,000, 25-year term, rates (approximate 2025):
At 80% LTV: 4.8% rate → monthly payment £1,143
At 75% LTV: 4.5% rate → monthly payment £1,109
Saving: £34/month = £408/year = £2,040 over 5-year fix
To drop from 80% to 75% LTV on a £250,000 property:
80% LTV: £200,000 mortgage
75% LTV: £187,500 mortgage
Extra deposit needed: £12,500
Is it worth it? £12,500 extra deposit saves £408/year
Payback period: 12,500 / 408 = 30.6 years
At this rate differential, probably NOT worth delaying purchase
to save the extra deposit (house prices may rise more)
The calculation changes at higher rate differentials (e.g. 85%→80%)
where the saving is much larger — typically £600-900/year.
Tracking LTV During Mortgage Term
LTV changes as: (a) you repay capital, (b) property value changes
Year 5 of £200,000 mortgage (25yr, 4.5%):
Capital repaid in 5 years: approximately £18,500
Remaining mortgage: £181,500
If property rose 15% (£250,000 to £287,500):
New LTV: £181,500 / £287,500 = 63.1%
This person went from 80% LTV to 63% — potentially qualifying for
best-rate products at remortgage (saving ~£100/month vs their
original 80% LTV rate).