Loan-to-value (LTV) ratio is one of the most important concepts in property finance. It determines how much you can borrow, what rate you will pay, and how much of your own money you need to contribute. Understanding LTV is essential for every property borrower.
What Is LTV?
LTV is expressed as a percentage and represents the ratio of the loan amount to the value of the property. For example:
- Property value: £500,000
- Loan amount: £350,000
- LTV: 70%
The remaining 30% (£150,000) is your equity or deposit.
Why LTV Matters
Interest Rates
Lower LTV ratios typically attract lower interest rates. A borrower at 60% LTV will usually pay less than one at 80% LTV, because the lender has more security.
Loan Availability
Most specialist lenders cap their LTV at 70-80%. The higher the LTV, the fewer lenders are available to you and the more restrictive the terms.
Risk Assessment
From the lender’s perspective, a lower LTV means a larger equity buffer if property values fall. This makes the loan less risky and enables better terms.
LTV in Different Contexts
- Bridging loans: Typically 65-80% LTV
- Development finance: 60-70% of land value, up to 90% of build costs
- Portfolio finance: Varies based on the portfolio composition
How to Improve Your LTV Position
- Increase your deposit or equity contribution
- Choose a less expensive property
- Add value through refurbishment before refinancing
- Use additional security (cross-collateralisation)
At StatusKWO, we work with borrowers to optimise their LTV position and secure the best possible terms. Contact us to discuss your situation.