At Empreso, we believe that strong financial decisions start with understanding the numbers behind them.
One of the most important—and often overlooked—factors in borrowing is your Loan-to-Value ratio, or LTV.
Let’s break down what it means and how it can help you borrow with confidence.
What Is Loan-to-Value (LTV)?
The Loan-to-Value ratio (LTV) compares how much you’re borrowing to how much the asset you’re purchasing is worth.
It’s a simple calculation that shows the balance between the loan and your personal investment.
Formula: LTV=Loan AmountAppraised Value×100LTV = \frac{Loan\ Amount}{Appraised\ Value} \times 100LTV=Appraised ValueLoan Amount×100
Example:
If you’re buying a home valued at £200,000 and borrowing £160,000, your LTV is 80%.
That means you’re covering 20% as a deposit and borrowing the remaining 80%.
Why Does LTV Matter?
Your LTV ratio indicates how much equity you have in your purchase — and that number can affect your loan terms, interest rate, and insurance costs.
Here’s why it matters:
- Loan approval: Lenders set maximum LTV limits for different types of loans.
- Interest rates: Lower LTV often means a lower interest rate.
- Mortgage insurance: If your mortgage LTV is above 80%, you may need to pay for insurance until your equity increases.
- Refinancing: A lower LTV gives you better options and more flexibility.
LTV Across Different Loan Types
- 🏠 Mortgages: Conventional loans often prefer an LTV of 80% or less. Government-backed mortgages may allow higher LTVs but come with additional insurance costs.
- 🚗 Car Loans: Some lenders offer up to 100% financing, but borrowers with lower LTVs often receive better rates.
- 🏡 Home Equity Loans & Refinancing: Lenders typically look for an LTV under 80% to approve new borrowing or refinancing applications.
How to Improve Your LTV
If your LTV is high, don’t worry — there are practical ways to improve it:
- Increase your deposit when buying.
- Pay down your loan regularly or make extra payments when possible.
- Increase your property’s value through upgrades or improvements.
Every step helps strengthen your financial position and lowers your overall borrowing cost.
Empreso: Your Partner in Smart Borrowing
At Empreso, we’re here to help you make confident, informed financial choices.
Whether you’re buying your first home, refinancing, or exploring your borrowing options, our mortgage and finance experts are ready to guide you every step of the way.
📞 Talk to an Empreso Mortgage & Finance Advisor today
➡️ Visit www.empreso.co.uk to learn more, request a call, or book your free consultation.
Let’s build your financial future — one informed decision at a time.
