What does LTV mean on a mortgage?

Loan-to-value is your mortgage amount divided by the property value, shown as a percentage. Borrowing £180,000 against a £200,000 home is 90% LTV. The lower it is, the more equity you hold and the cheaper the interest rates you can access.

What is a good LTV to get the best mortgage rates?

The cheapest rates are generally at 60% LTV and below, meaning a deposit or equity of 40% or more. Rates step down at bands around 95, 90, 85, 80, 75 and 60 percent, so the biggest gains come from crossing into the next lower band.

How can I lower my loan-to-value?

Three ways: put down a bigger deposit, overpay the mortgage to shrink the balance faster, or benefit from your property rising in value. Each reduces the loan relative to the value. Crossing a band threshold is where the rate saving actually kicks in.

Does a lower LTV really save money?

Yes. The gap between the highest and lowest LTV bands is roughly 1 to 2 percentage points. On a £200,000 loan, moving from about 5.1% to 4.2% saves around £100 a month, over £1,000 a year, for exactly the same debt.

Guide · 4 minute read · Updated 10 Jul 2026

What is LTV (loan-to-value) and how do I improve it?

Loan-to-value, or LTV, is simply the size of your mortgage divided by the value of the property, written as a percentage. It is the single biggest lever on the interest rate you are offered: the lower your LTV, the cheaper the money. Getting under the next band down is often worth real cash.

How to work out your LTV

Divide the loan by the property value and multiply by 100. Borrow £180,000 against a £200,000 home and your LTV is 90%. Put down a bigger deposit, say £50,000, and you borrow £150,000, an LTV of 75%.

The mirror image of LTV is your equity, the share you own outright. At 90% LTV you own 10%; at 75% LTV you own 25%. Everything that raises your equity lowers your LTV, and that is what unlocks better rates.

Why the bands matter so much

Lenders do not price LTV smoothly. They set it in bands, and the rate steps down each time you cross a threshold, typically at 95%, 90%, 85%, 80%, 75% and 60%. The cheapest rates sit at 60% LTV and below; the most expensive are at 95%.

In mid-2026 the gap between the top and bottom bands is roughly 1 to 2 percentage points. As a rough illustration, a 95% deal might be around 5.1%, while a 60% deal is closer to 4.2%. On a £200,000 loan, moving from a 5.1% rate to a 4.2% rate saves in the region of £100 a month, or over £1,000 a year, for the same debt. That is why nudging your deposit over a band boundary can matter more than shaving a few thousand off the purchase price.

A worked example

Say you are buying a £250,000 home and have £30,000 saved. That is a £30,000 deposit, a £220,000 loan, and an LTV of 88%, which puts you in the 90% band.

Find another £2,500, so a £32,500 deposit, and your loan drops to £217,500, an LTV of 87%. Still the 90% band, so no change to the rate; the extra saving did little for your rate. But stretch the deposit to £37,500, a 15% deposit, and you land at exactly 85% LTV, crossing into the cheaper 85% band. The lesson: it is worth knowing where the nearest band boundary sits, because the last few thousand pounds of deposit only pays off if it takes you across one.

Three ways to improve your LTV

You lower your LTV by shrinking the loan relative to the value. Three levers do this:

A bigger deposit. The most direct route. Every extra pound of deposit is a pound less borrowed, and crossing a band threshold is where it counts.
Overpayments. Paying down the balance faster cuts the loan while the value holds steady, so your LTV falls over time. Most fixed deals let you overpay up to 10% of the balance a year without penalty; check the effect with the mortgage overpayment calculator.
A rising property value. If your home is worth more than when you bought, your LTV falls even if the loan has not, because the denominator grew. This is often how people reach a much cheaper band at remortgage time.

The payoff comes when your current deal ends. If overpayments and rising value have dropped you from, say, 90% to 75% LTV, you can remortgage into a materially cheaper band. Time the switch with the remortgage calculator so you capture the lower rate as soon as your deal allows.

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Whether switching deals saves money after the arrangement fee and any exit charge.

Common questions

What does LTV mean on a mortgage?: Loan-to-value is your mortgage amount divided by the property value, shown as a percentage. Borrowing £180,000 against a £200,000 home is 90% LTV. The lower it is, the more equity you hold and the cheaper the interest rates you can access.
What is a good LTV to get the best mortgage rates?: The cheapest rates are generally at 60% LTV and below, meaning a deposit or equity of 40% or more. Rates step down at bands around 95, 90, 85, 80, 75 and 60 percent, so the biggest gains come from crossing into the next lower band.
How can I lower my loan-to-value?: Three ways: put down a bigger deposit, overpay the mortgage to shrink the balance faster, or benefit from your property rising in value. Each reduces the loan relative to the value. Crossing a band threshold is where the rate saving actually kicks in.
Does a lower LTV really save money?: Yes. The gap between the highest and lowest LTV bands is roughly 1 to 2 percentage points. On a £200,000 loan, moving from about 5.1% to 4.2% saves around £100 a month, over £1,000 a year, for exactly the same debt.

Guidance and education, not regulated financial advice.