Scope: UK-wide; lender valuations and criteria vary. Use current official guidance and qualified advice for decisions involving finance, tax or legal rights.
The basic calculation
Loan-to-value, usually shortened to LTV, expresses the mortgage loan as a percentage of the property value used for the calculation. Divide the loan by the value, then multiply by 100. It describes a relationship between two amounts; it is not the interest rate charged on the borrowing.
An illustrative purchase
Suppose a home is valued at £250,000 and the mortgage is £200,000. The calculation is £200,000 ÷ £250,000 × 100, giving an LTV of 80%. The £50,000 difference is 20% of the value. This example leaves purchase costs out of the calculation to keep the arithmetic clear.
Why the valuation matters
Now suppose the amount borrowed stays at £200,000 but the value used is £240,000. The ratio becomes about 83.3%. A different valuation can therefore change the LTV without the loan amount changing. Ask the lender or adviser which figure is being used and what that means for the application.
Use the figure in context
Mortgage products can be grouped into LTV ranges, but LTV alone does not determine eligibility or the best option. Income, commitments, the property and the product’s terms also matter. Compare the whole arrangement rather than assuming that crossing a percentage boundary guarantees a particular saving.
Check your own comparison
- Use the proposed loan, not the property’s full purchase price, as the numerator.
- Confirm the value used by the lender.
- Keep fees and other cash needs visible separately.
- Compare calculations on the same basis.
For an existing mortgage, obtain the relevant balance and discuss the valuation basis before drawing conclusions from an estimated current house price. A rough online valuation is not automatically the lender’s accepted figure.