What loan to value means for your mortgage
Loan to value, usually shortened to LTV, is your outstanding mortgage balance shown as a percentage of what your home is worth. If your property is worth £300,000 and you owe £210,000 against it, your LTV is 70%. Lenders use this figure to decide which rates they will offer you, because a smaller loan against a given property carries less risk for them.
Your equity position is the other side of the same sum: it is the pounds-and-pence value of the home that is yours outright, worked out by subtracting your outstanding balance from the property's value. On the example above, that is £90,000 of equity. Both figures move together, but they answer different questions. LTV tells a lender how much of a risk you look like. Equity tells you how much of the house is actually yours.
How this calculator uses your numbers
You enter two things: an estimate of your property's current value and your outstanding balance, the amount left to pay off on your mortgage. From those two numbers the calculator works out your LTV percentage and your equity in pounds, and shows you which lending band that LTV falls into.
The property value you enter is an estimate, most likely based on what similar homes nearby have sold for or on a lender's automated valuation, and your own figure will not match a formal valuation exactly. Because of that, treat the result as a working figure that tells you roughly where you stand, not a guaranteed number a lender will agree to. A lender's own valuation, done as part of your application, is the one that actually decides your rate.
Why your LTV band affects the rates you're offered
Lenders price mortgages in bands, commonly around 60%, 75%, 85%, 90% and 95% LTV. Move from one band into the one below it, even by a small margin, and you can unlock a noticeably better set of deals, because the lender is now lending against a larger cushion of your equity.
This is why the calculator is worth running before your fixed-rate deal ends. If your outstanding balance has fallen and your property value has held up or risen, you may have crossed into a lower LTV band without realising it, which changes the deals available to you. Paying down your balance faster than scheduled has the same effect: it is covered in more detail in the mortgage overpayment guide if that route interests you.
None of this tells you what rate a specific lender will actually offer you. Rates vary between lenders and change frequently, and this calculator does not have access to any lender's live pricing. What it gives you is the band you sit in, which is the figure a broker or lender will ask for first.
What to do with your result
Once you know your LTV band and equity position, the useful next step is to see what that means for your monthly payment once your current deal ends. The what your number means page walks through that in plain terms.
- Check the timing: most lenders accept applications up to six months before your fixed deal ends. The six-month checklist sets out what to do and when.
- Compare who lends at your band: the mortgage lenders directory lists UK lenders, though it does not tell you which one will approve you or at what rate.
- Talk to a broker: you have your LTV and equity figures now. A broker can tell you what deals are actually available at that band, based on your full circumstances, which this calculator cannot do.
The what to do next page brings these together in order, if you would rather follow one page through than jump between them.