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LTV ratio shows what percentage of the property value is mortgaged. As equity builds through repayments and price growth, LTV falls, unlocking better mortgage deals.
Formel
LTV% = Loan amount / Asset value × 100% (same formula, context differs by asset type)
- Loan
- Total loan amount (Currency)
- Value
- Current market value of asset (Currency)
Trin-for-trin guide
- 1LTV = Mortgage balance / Property value × 100
- 2Remortgaging at lower LTV tier saves money
- 3Overpayments accelerate LTV reduction
- 4Rising property values also reduce LTV passively
Løste eksempler
Input
Mortgage £200k, home £280k
Resultat
LTV = 71.4% — competitive rate territory
Ofte stillede spørgsmål
How does LTV apply to investment property?
BTL LTV limits are stricter: typically max 75% vs 80% for owner-occupied. Higher rate premium. Lender sees pure investment as higher risk (vs owner incentive to pay).
What if property value drops?
LTV rises. At 80% LTV, a 10% property price drop → 88.9% LTV. Some loans have LTV covenants; breach triggers acceleration. This is "negative equity" risk.
Is LTV the same as loan-to-cost?
No. LTC is loan / total cost (acquisition + development). LTV is loan / current value. LTC matters at origination; LTV is ongoing risk measure.
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