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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.