Loan-to-Value (LTV) and deposit explained
In short. Loan-to-Value is the loan as a percentage of the property's value. A £180,000 loan on a £200,000 home is 90% LTV. UK lenders price in bands (60%, 75%, 80%, 85%, 90%, 95%), with the cheapest rates at 60% LTV and below. The Mortgage Guarantee Scheme makes 95% LTV lending widely available for first-time buyers and movers; 100% LTV mortgages exist but are rare.
LTV is the single biggest driver of mortgage pricing after the headline Bank Rate environment. Crossing into a lower band at refinance time can save tens of basis points on the rate.
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Typical LTV bands and deposit
- 60% LTV — 40% deposit; usually the lowest rates available
- 75% LTV — 25% deposit; small premium over 60%
- 80% LTV — 20% deposit
- 85% LTV — 15% deposit
- 90% LTV — 10% deposit
- 95% LTV — 5% deposit; supported by the government Mortgage Guarantee Scheme (extended to June 2026 then replaced by a successor)
- 100% LTV — very limited; products exist for borrowers with a strong rental history (e.g. Skipton Track Record) but not widely available
How the bands are valued
The lender's valuation, not the purchase price, determines the LTV. On a remortgage the lender uses a desktop or surveyor valuation; on a purchase it's the lower of the purchase price and the valuation. If the valuation comes in below the asking price, either the deposit has to be increased or the price renegotiated to keep the LTV in the same band.
Improving LTV at remortgage
- Time and house-price growth do most of the work — a 2-year fix taken at 90% LTV often refinances at 80% or 85%
- Capital repayments during the deal reduce the loan balance
- Overpayments within the 10% annual allowance reduce the balance without an early repayment charge
- A higher RICS valuation can push the loan into a cheaper band — borrowers can challenge an obviously low valuation with comparable evidence
FAQ
- Is a bigger deposit always better?
- Within LTV bands, extra deposit only saves money once it crosses into the next band. £5,000 extra that takes a borrower from 91% to 89% LTV moves them into the 90% band and often saves more than another £5,000 that takes them from 86% to 84% LTV.
- Does deposit have to be cash?
- Mostly yes — most lenders require evidence of saved deposit. Family-gifted deposits are usually allowed with a signed letter confirming the gift is not a loan. Equity from a sold home counts in full.
- Can I include a Lifetime ISA bonus in my deposit?
- Yes — the 25% LISA government bonus released through a solicitor on completion counts towards the deposit on a first home up to £450,000.