Loan-to-value (LTV) is the mortgage ratio, measured as a percentage, to the property value. Example, if you buy a £200k property with a £20k (10 per cent) deposit, you\’ll need an LTV mortgage of 90 per cent. In the calculator on this site, you will find out which LTV you need by entering your deposit (or equity if you are remortgaging) and the value of the house.
LTV stands for loan-to-ratio. An LTV calculator works out how much money you will need to borrow in addition to your deposit payment on a property. You can do this online using our very own LTV calculator, which was initially designed to assist property investors in the UK.
The loan-to-value ratio (LTV) represents the amount of a mortgage lien as a percentage of the property’s gross appraised value. For example, if a borrower needs £130k to buy a house worth £250k, the ratio for LTV is £130,000/£250,000 or 52%.
Loans to value are managed by mortgage lenders to determine whether to lend or not.
Loan-to-value (LTV) ratio is a lending risk measure that financial institutions and other borrowers study before authorizing a mortgage. Usually, high LTV ratio tests are higher risk, and thus, if the mortgage is accepted, the borrower would be paid more for the loan.
Furthermore, a mortgage with a high LTV ratio can require that the borrower buy mortgage insurance to minimize the lender\’s risk.
When it comes to determining what interest rate the mortgage lender can give you, LTV is the single most important factor. If you have low LTV, you’ll get a slightly lower interest rate, which can be tens – or hundreds – of thousands of pounds saved over your mortgage’s lifetime.
For example, a mortgage lender will give you a two-year fixed-rate mortgage of 95 percent LTV with an interest rate of 2.3%. If you lower the LTV to 90%, the interest rate can be closer to 1.8%. It’s a good idea to use an LTV calculator to work out your costings.
The mortgage lender takes less risk if you have a low LTV – and they reward the lower level of risk by offering you a preferential interest rate.
When you borrow £190,000 to buy a £200,000 property (95 percent LTV), and then the property’s value decreases, and you can’t keep up monthly payments, there’s a risk the creditor won’t get back any of their money. The mortgage provider hedges this higher risk level by allowing you to pay more interest on your loan.
If you just need a £150,000 mortgage to purchase the same £200,000 property (75 percent LTV), there\’s a lot of wiggle room: the bank will be able to sell your home and make most or all of its money back.
There are only two options to reduce the LTV: save a more significant deposit, or raising the amount of borrowing capital you need.
If, for example, you’re close to an LTV threshold – 91% – then it’s probably worth spending a little more money or getting a slightly better price on the property you want to purchase. By passing the LTV mark of 90 per cent, you are expected to save thousands of pounds in interest repayments in the coming years.
The other choice is to find a cheaper home, even though you do not like it.
We hope you found our information on LTV useful and we hope our calculator meets your expectations and assists you in calculating your LTV.