Mortgage LTV explained: how your deposit changes the calculation

Loan-to-value, usually shortened to LTV, compares the mortgage balance with the property’s value. It is one of the figures lenders use when grouping mortgage products, but it is not a complete affordability test or a promise that a particular deal will be available.

For a purchase, the starting loan is normally the price minus the cash deposit. For an existing home, use the mortgage balance and a realistic current property value. The LTV calculator can handle either comparison and shows the deposit or equity alongside the percentage.

How to calculate LTV

Divide the mortgage amount by the property value, then multiply by 100. A £216,000 mortgage on a £240,000 property has an LTV of 90%. The £24,000 difference is a 10% deposit at purchase. On an existing home, the difference between value and mortgage balance is equity rather than a new cash deposit.

Use the agreed purchase price when planning a purchase, but remember that a lender will also arrange a valuation. If that valuation is lower than the price, the lender may calculate its offer against the lower figure. That can mean finding a larger deposit, renegotiating or choosing another property.

Why deposit bands matter

Lenders commonly organise products around maximum LTV bands. Moving below a boundary can widen the range of products, but the lowest advertised rate is not automatically the cheapest choice. Product fees, valuation fees, incentives, the fixed period and early repayment charges all affect the total cost.

Test the actual loan, rate and term with the Mortgage Repayment calculator. Compare both the monthly payment and the interest shown rather than judging a mortgage from its LTV band alone.

How LTV changes after completion

LTV can fall when capital is repaid or the home rises in value. It can rise when the property value falls, and adding fees to the loan starts the balance higher. On an interest-only mortgage, scheduled payments normally cover interest rather than reducing the capital, so the balance may not fall in the same way.

For a remortgage estimate, obtain the current redemption balance from the lender and use a cautious property value. An estate-agent estimate or online valuation is not the lender’s formal valuation.

Negative equity and small deposits

Negative equity means the mortgage balance is greater than the property’s value. A small starting deposit leaves less room for a price fall before that happens. It can make selling or remortgaging harder because the sale proceeds may not clear the loan.

Do not put every available pound into the deposit without also budgeting for tax, legal work, surveys, moving costs and an emergency reserve. A slightly lower LTV does not help if the purchase leaves no cash for essential costs or repairs.

A practical comparison

Run at least three versions: the deposit already saved, a cautious lower property valuation, and the next deposit amount you could realistically reach. For each version, note the mortgage required and model its repayment at both the offered rate and a higher test rate. This separates the deposit question from the monthly-affordability question.

Limits and official guidance

The calculator does not assess income, credit history, property eligibility or a lender’s criteria. Read MoneyHelper’s mortgage deposit guidance and the GOV.UK overview of buying a home. Get regulated mortgage advice if you need a recommendation for your circumstances.

Already have a mortgage? See how a changing balance and property valuation affect the next deal in remortgage LTV guide.