Loan-to-Value (LTV) Explained Simply

Why This Number Decides Your Deal

If you’ve ever compared mortgage products, you’ve seen it everywhere—“up to 75% LTV” or “maximum 60% LTV”. But what exactly does it mean, and why do lenders care so much?

At Genius Academy, we often say: your LTV tells your lender how much skin you have in the game. It’s a simple ratio that reveals how much of a property’s value is funded by debt versus your deposit. Understanding LTV helps you borrow strategically, manage risk, and even negotiate better interest rates.

What Is Loan-to-Value (LTV)?

LTV stands for loan-to-value ratio, and it measures how much you’re borrowing compared to the property’s total value.

Formula: LTV = (Loan Amount ÷ Property Value) × 100

Example: If you buy a property worth £200,000 and borrow £150,000, your LTV is (150,000 ÷ 200,000) × 100 = 75% LTV

That means you’re putting in a 25% deposit, and the lender is funding the rest.

Why LTV Matters

The higher your LTV, the greater the risk for the lender — because you’re borrowing more relative to the asset’s value.

High LTV (e.g., 85–95%)

• Lower deposit, easier entry.

• Higher interest rates increase the lender's risk.

• Stricter affordability checks.

Low LTV (e.g., 60–75%)

• Lower rates and more product options.

• Easier remortgage or refinancing.

• Low LTV (e.g., 60–75%) offers greater protection in the event of property values falling.

  
  

In simple terms: the smaller your deposit, the tighter the lender’s safety net.

How It Impacts Your Monthly Payments

Let’s compare two buyers purchasing the same £200,000 property:

Buyer	Deposit	Loan	LTV	Interest Rate	Monthly Payment (25 yrs)
A	£20,000	£180,000	90%	6.0%	£1,159
B	£50,000	£150,000	75%	4.5%	£833

Buyer B pays £326 less per month simply because they borrowed less relative to value—that’s over £3,900 saved each year.

How LTV Affects remortgaging

Your LTV isn’t fixed forever. As you repay your loan or your property value increases, your LTV drops — and your borrowing position improves.

Example:

• Original value: £200,000

• Mortgage: £150,000 (75% LTV)

• Five years later, property value rises to £240,000, mortgage balance £140,000 New LTV = (140,000 ÷ 240,000) × 100 = 58%

This type of loan could qualify you for lower rates at renewal because you now sit in a more favourable LTV band.

LTV Bands and Risk Tiers

Lenders typically structure mortgage products in “bands” or thresholds. Common LTV tiers include:

• A 95% LTV indicates very high risk, offers limited products, and is available only to first-time buyers.

• 85–90% LTV – moderate risk, higher rates.

• 75–80% LTV – standard for buy-to-let and refinances.

• 60% LTV or below – low risk, best rates and flexible lending.

Every 5–10% difference in LTV can change your available lenders, interest rate, and fees.

Don’t Always Chase the Lowest LTV

While lower LTVs give cheaper rates, tying up too much cash can limit your portfolio growth. Some investors prefer a slightly higher LTV (e.g., 70–75%) to keep liquidity for future deposits or refurbishments.

The goal isn’t just to borrow less—it’s to borrow strategically.

Reflection: The Balance Between Leverage and Safety

Your LTV reflects your balance between risk and control. Too high, and you expose yourself to market dips. Too low, and your money sits idle.

Smart investors treat LTV as a tool, not a rule. It’s about finding the right ratio for your goals — stability, growth, or flexibility.

At Genius Academy, we teach that understanding LTV is one of the first steps to mastering mortgage strategy.