1. What is Loan-to-Value (LTV)?

The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. In the UK property market, it's a key metric used by mortgage lenders to assess risk.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• \( Loan\ Amount \) — The amount borrowed (in £)
• \( Property\ Value \) — The value of the property (in £)

Explanation: The LTV ratio shows what percentage of the property's value is being financed by the loan. A lower LTV generally means better mortgage rates.

3. Importance of LTV Calculation

Details: LTV is crucial for mortgage applications in the UK. It affects interest rates, loan eligibility, and whether lenders will require mortgage insurance. Most UK lenders prefer LTV ratios below 90%.

4. Using the Calculator

Tips: Enter the loan amount and property value in pounds sterling (£). Both values must be positive numbers. The calculator will compute the LTV percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio in the UK?
A: Generally, the lower the better. Below 60% is considered excellent, 60-80% is good, and above 80% may limit mortgage options.

Q2: How does LTV affect mortgage rates?
A: Lower LTV ratios typically qualify for better interest rates as they represent less risk to the lender.

Q3: Can I get a 100% LTV mortgage in the UK?
A: These are rare since the 2008 financial crisis, though some 95% LTV mortgages are available, often requiring a guarantor.

Q4: Does LTV include deposit?
A: No, LTV refers to the loan amount relative to property value. Your deposit is the portion not covered by the loan (100% - LTV).

Q5: How is property value determined for LTV?
A: Lenders typically use the lower of the purchase price or their valuation survey amount.