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What does LTV mean?

When you’re looking to buy your dream home you’re going to need to understand what an LTV means. Read on to find out more!

LTV (loan-to-value), or Loan to Value Ratio, is a financial term which is used by lenders. It’s pretty easy to understand too. Basically, it means the size of your mortgage in accordance with the value of the property that you wish to buy. Let’s check out an example. So, if you get a mortgage £200,000 and you’re about to buy a property which is priced at £400,000 then your LTV will be 50% (£200,000 of £400,000).

Why is it important to understand the importance of you LTV?

In simple terms, the larger your LTV is then the larger the risk it will pose to the lender for you to borrow money. This is because the less equity that you have in your property the more exposed the lender is if you stop making payments on your mortgage & they are forced to repossess. 

This is because the value of your property being sold as a way of the lender recouping costs could potentially drop beneath the sum that you you owe when legal fees & sales costs are taken into account. 

How will this effect my mortgage application?

Unfortunately, if you have a high LTV then the amount of mortgage rates on offer to you are going to be limited. This also works vice versa. If you have paid a large deposit amount and as a result your LTV is rather low then you will be much more likely to be open to a range of mortgage rates across the property market. Basically, the safer the lenders money is the better the rate they will offer.

How can I help ensure that I have a low LTV?

The easiest way of doing this is by making sure that you save as much towards your deposit as you can. This may mean that you could have to wait longer before securing your first move. However, as the amount that you contribute to your deposit will then turn into your equity in the home then this will go a long way to helping you have a lower LTV.

This can be a great boost in helping you get the mortgage deal that you really want! Alternatively, you could go for a property, which is of lower value. This will reduce the size of your mortgage and the size of any potential risks towards your lender.

How can we help?

At Mortgages Online we can offer you a market-wide comparison of thousands of different mortgages from hundreds of different lenders. So, regardless of what your LTV ratios are, we can help you find the best deal that suits you. The great thing is that we’re a free service and operate 24/7. So, we recommend that you check out some of the other articles on our site.

Mortgages Online have tonnes of articles to help you understand mortgages better. With information on credit scores, LTV mortgages, fixed rate mortgage and more, we provide you with the tools you need to get on the property ladder. Click to our Articles section to find out more.


Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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