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Learn what loan to value is and how it could affect you buying a home.
Loan to value ratio, or LTV, is the ratio of what you borrow as a mortgage against how much you pay as a deposit.
Here’s how loan to value ratio works:
You pay a deposit of £20,000 for a property worth £200,000.
You get a mortgage of £180,000 to pay for the rest.
Your deposit covers 10% of the house price.
So, your LTV is 90%.
The lower your LTV ratio, the higher your equity in a property. Having higher equity can help protect you from negative equity.
The value of a house can rise and fall. If the value of your home is lower than the amount you still have remaining to pay on a mortgage, you are in negative equity. This can make it harder to sell or remortgage.
The content on this page is for reference and does not constitute financial advice. For impartial financial advice, we recommend government bodies like MoneyHelper.