When you apply for a mortgage, the lender will look at your loan-to-value ratio (LTV) to help determine how risky it is and what deals they are prepared to offer you. Your LTV simply means how much you are borrowing relative to the property’s value.
A good loan-to-value ratio is widely considered 80% or lower. A 20% deposit reduces risk for the mortgage lender, so they may offer you more deals and better mortgage rates. But the “right” LTV depends on your budget, income, savings and goals.
This is a particularly important subject for first-time buyers who may be weighing up whether saving more of a deposit is worthwhile versus taking the plunge. In this guide, we explain in more detail what loan-to-value means, how to work it out, what a “good” LTV ratio looks like, and what it might mean for you.
For free, independent advice on your first or next mortgage, contact the YesCanDo Money team today.
What does loan-to-value ratio mean?
Loan-to-value ratio is the size of your mortgage compared with the value of the property you want to buy or remortgage. It’s shown as a percentage.
The lower your LTV, the more equity (or cash) you have in the property. The higher your LTV, the bigger your debt.
Banks use LTV to assess the risk of losing money if a borrower defaults. If they have to sell the property to cover the debt, a lower LTV provides them with greater protection if the property’s value drops.
How do you calculate your LTV?
Your loan-to-value ratio can be calculated really easily as follows:
Mortgage amount ÷ property value x 100 = LTV
For example:
Your property is worth £300,000; you have a £60,000 deposit, meaning you will need to borrow £240,000.
£240,000 ÷ £300,000 x 100 = 80% LTV
Another way to look at it is that you are borrowing 80% of the value of the property and paying 20% yourself.
What is a good LTV ratio?
For most home buyers, an LTV of 80% or lower is a “good” ratio because it gives you access to a wider choice of mortgage deals and potentially better rates.
That said, “good” depends on your situation.
For a first-time buyer, a 90% or 95% mortgage may still be “good” as it would help them get on the property ladder sooner.
For a homeowner that is remortgaging, a 60% or 75% LTV would be good, as it could help them access lower interest rates and more competitive mortgage deals.
As a general guide:
| LTV | What it usually means |
|---|---|
| 95% LTV | 5% deposit or equity. Higher risk for lenders, fewer deals and usually higher rates. The choice of lenders is more limited, and the criteria can be stricter. |
| 90% LTV | 10% deposit or equity. Common for first-time buyers, but rates are usually higher than lower LTV bands. Good availability, though not as broad as lower-LTV options. |
| 80% LTV | 20% deposit or equity. Widely considered a strong position. From this point, you will have a wider choice of lenders and mortgage deals. |
| 75% LTV or lower | 25% deposit or equity. May give access to better rates and more competitive mortgage products. |
| 60% LTV | 40% deposit or equity. The sweet spot – you may be able to access the most competitive rates. |
Most lenders price mortgages in different LTV bands. This is why even a small change can sometimes make a noticeable difference. Dropping from 91% to 90% LTV, or from 81% to 80% LTV, may give you access to a whole new range of products.
What is the maximum LTV most lenders will accept?
Many mortgage lenders offer deals up to 90% or 95% LTV, depending on your circumstances and the wider mortgage market. These deals did become harder to find during the pandemic, but since the government’s Mortgage Guarantee Scheme was introduced, they have become more widely available on the high street.
A 95% LTV mortgage means you only need a 5% deposit. For example, if you buy a property for £220,000, you would need a deposit of £11,000 and a mortgage of £209,000.
While this might be great news for a lot of first-time buyers, high LTV mortgages come with higher monthly repayments, so a steady, reliable income is really important before you take one on.
To give you an idea of what the monthly mortgage repayments might look like, you can use an online mortgage calculator. For added reassurance, a chat with a mortgage broker can be really beneficial. They can help you work out what you may be able to borrow, compare suitable mortgage deals and explain how your LTV could affect your rate, repayments and lender options.
Is a bigger deposit always a good idea?
The bigger the deposit, the less money you need from the lender, which usually makes you a lower risk in their eyes. As a result, you will likely have access to more mortgage deals and more favourable rates. Providing the rest of your application is strong, a larger LTV ratio may also improve your chances of approval.
However, it doesn’t mean you should put every penny of your savings into your deposit. You will still need money for legal fees, surveys, removals, furniture, emergency savings and everyday life after you move in. A mortgage broker can help you find the sweet spot so you feel confident about the size of loan you’re taking on.
How much does LTV really affect mortgage rates?
Under 75% LTV, the difference in rates is marginal. The biggest jumps are often between 95% and 90%.
So if you are considering a 5% deposit or stretching to 10%, it could make a meaningful difference to your monthly repayments.
However, while this can save you money, you shouldn’t compromise your short-term financial security just to chase a slightly lower interest rate. It’s sensible to leave enough money in your savings for the realities of moving into a new house: a broken boiler, a missing sofa, solicitor fees or even just a few months of breathing room.
Is a high LTV mortgage a bad idea?
As with many mortgage questions, the answer is: it depends.
For many first-time buyers, a high LTV mortgage is the difference between buying now and spending several more years trying to save a bigger deposit.
Say you have a 5% deposit. A 95% mortgage could help you get onto the property ladder sooner, but there are trade-offs. Because you are borrowing more of the property’s value, lenders see this as higher risk. That usually means higher interest rates, bigger monthly repayments and fewer mortgage deals to choose from.
You should also consider the risk of negative equity, which occurs when your home falls in value and you end up owing more than the property is worth. This can make it harder to sell or remortgage your home until values recover or your mortgage balance reduces.
That does not mean high LTV mortgages are a bad idea for everyone. It just means you need to consider the whole picture, i.e. your deposit, income, monthly budget, moving costs, emergency savings and future plans, and make your decision wisely.
Do rising house prices impact LTV?
If you own your home and its value rises, your LTV may improve. For example, if you owe £180,000 on a home worth £225,000, your LTV is 80%. If the home rises to £250,000, your LTV drops to 72%. That’s good news for when you come to remortgage, as you might be able to secure a better deal.
For first-time buyers, rising house prices are obviously more problematic. For many, the hardest part is knowing when to take the leap. Do you keep saving for a bigger deposit and a lower LTV, or buy sooner before prices increase even more?
There is no perfect answer. Waiting can put you in a stronger position, but buying with a higher LTV may still make sense if the monthly repayments are affordable and you have enough money left for fees, moving costs and emergencies. It is about what is realistic and safe for you.
That is why it can help to review your options with a mortgage adviser early on. You may decide to wait and save for a bigger deposit, or you might find that adjusting your budget, looking at a different area, choosing a smaller first home, or considering a 95% mortgage could help you buy sooner.
How can you reduce your loan-to-value ratio as a first-time buyer?
There are a few ways a first-time buyer can improve their LTV.
- Increase your deposit. Moving into a lower LTV band can affect the deals and rates available.
- Buy at a lower price. Many first-time buyers choose a more affordable property (or negotiate more aggressively!)
- Family-assisted mortgages. Not everyone is fortunate enough to have the Bank of Mum and Dad, but if a parent or close family member can support your application, this can improve your options without relying only on a larger cash deposit.
How does LTV work when remortgaging?
For existing homeowners, every repayment you make chips away at what you owe on your mortgage (except if you have an interest-only mortgage, of course). Providing your property value stays the same or rises as your balance falls, your LTV will improve, which can put you in a stronger position when you remortgage.
However, don’t expect your LTV to move dramatically in the first few years. Many homeowners choose to make overpayments, although you should check your mortgage terms first, as many lenders limit how much you can overpay without a charge.
Talk to YesCanDo Money about what your LTV realistically means for you
Your loan-to-value ratio is only one part of your mortgage application, but it can make a big difference to the deals you can access.
At YesCanDo Money, we help buyers and homeowners understand their numbers and feel confident about their options.
Whether you are buying your first home, moving home or looking to remortgage, our friendly mortgage brokers can compare options from across the market and guide you towards a mortgage that fits your plans.
Get in touch with YesCanDo Money for free advice and find out what your LTV could mean for your next mortgage.
Frequently asked questions – what is a good LTV ratio for a mortgage?
Should first-time buyers be concerned about LTV?
Yes, but it should guide your decision, not overwhelm it. Your LTV affects your deposit, mortgage options and the rates you may be offered. A lower LTV can help, but waiting to save more is not always the right move. Work out your LTV early, then compare what is realistic now with what could improve if you saved for longer.
Does LTV determine how much you can borrow?
Your LTV shows how much you want to borrow compared with the property value, so it helps lenders decide which mortgage deals you may qualify for. However, it does not decide your borrowing limit on its own. Lenders will also look at your income, regular spending, credit history, employment, deposit source and whether the repayments would be affordable.
Are 100% mortgages still available?
100% mortgages are available in 2026, but they are limited and come with very strict terms. A 100% mortgage lets you borrow the full property value, so there is no cash deposit. They are usually aimed at first-time buyers or renters with a strong payment history, or buyers with family support through guarantor or family-assisted schemes.
At YesCanDo Money, we would only recommend a 100% mortgage if it genuinely suits your circumstances and the repayments are affordable. For many buyers, building even a small deposit may provide more choice, better rates and a stronger starting point.
