Loan-to-Value for Mortgage Brokers: Loan-to-value is a simple percentage with significant practical consequences.
It shows how much a client wants to borrow compared with the property’s value. For mortgage brokers, that percentage can influence lender choice, product availability, pricing and case preparation.
A correct LTV calculation does not determine whether a mortgage will be approved. However, it gives the broker an early indication of where the case may fit.
Loan-to-Value Guide
- LTV compares the mortgage amount with the property value.
- Divide the loan by the property value and multiply by 100.
- Higher LTV can mean fewer products and closer underwriting.
- Lower LTV may improve choice but does not replace affordability checks.
- Valuation changes, added fees and further borrowing can alter the final LTV.
- Brokers should establish the correct calculation before researching lenders.
What Is Loan-to-Value?
Loan-to-value, usually shortened to LTV, is the percentage of a property’s value funded by secured borrowing.
The basic formula is:
Mortgage amount ÷ property value × 100 = LTV
For example:
- Property value: £300,000
- Mortgage required: £240,000
- Deposit: £60,000
- Loan-to-value: 80%
The lender would provide 80% of the property value. The client would contribute the remaining 20% as a deposit.
Why Does LTV Matter to Mortgage Brokers?
LTV helps lenders assess how much of the property’s value is exposed to borrowing.
A higher percentage normally means the client has less deposit or equity. This can increase the lender’s exposure if the property must be sold following payment problems.
LTV may therefore affect:
- Available mortgage products
- Maximum borrowing
- Interest rates and fees
- Deposit requirements
- Property eligibility
- Underwriting evidence
- Lender selection
However, LTV is only one part of the assessment. Income, affordability, credit history, property type and the source of the deposit can remain decisive.
How LTV Bands Affect Product Choice
Mortgage products are often arranged around defined LTV limits.
Common bands include:
| LTV band | Practical meaning |
|---|---|
| 60% or below | The client has substantial equity or deposit |
| 61% to 75% | A common range across many mortgage sectors |
| 76% to 85% | Criteria and affordability may become more restrictive |
| 86% to 90% | Deposit source and credit conduct become more important |
| Above 90% | Product choice may be limited and underwriting may be closer |
These bands are illustrative. Each lender applies its own criteria and product limits.
A case at 75.1% may not qualify for a product capped at 75%. Accurate figures are therefore important before a recommendation is considered.
Brokers can review the breadth of available lending routes through Connect’s network panel of lenders.
Purchase Price and Valuation
For a purchase, the initial calculation is normally based on the agreed property price.
However, the lender will arrange or assess a valuation. Where the valuation is lower than the purchase price, the lender may calculate its maximum advance using the lower figure.
Purchase example
A client agrees to pay £400,000 and requests a mortgage of £340,000.
£340,000 ÷ £400,000 × 100 = 85% LTV
The lender then values the property at £380,000.
£340,000 ÷ £380,000 × 100 = 89.47% LTV
The requested loan has not changed, but the lending risk has. The case may move into another product band or require a larger deposit.
This is why brokers should avoid presenting an early LTV calculation as a guaranteed product position.
LTV on a Remortgage
For a remortgage, LTV is generally based on the proposed mortgage balance and the property’s current value.
A client may begin with a relatively low LTV but move into another band after requesting capital raising.
For example:
- Current property value: £500,000
- Existing mortgage requirement: £300,000
- Initial LTV: 60%
- Additional borrowing: £75,000
- Revised mortgage: £375,000
- Revised LTV: 75%
The reason for additional borrowing may also affect lender criteria. Brokers should establish the full loan purpose before beginning product research.
How LTV Differs Across Mortgage Types
The calculation remains similar, but its practical use can change between lending sectors.
Buy-to-let
Buy-to-let lenders assess LTV alongside rental income, interest coverage calculations, property type and landlord experience.
A lower LTV does not correct a rental shortfall. Both the property security and rental assessment must meet the lender’s requirements.
Bridging finance
Bridging lenders may consider the day-one advance, gross loan, net loan or total facility.
Fees and retained interest can increase the amount secured against the property. The broker must confirm which figure the lender uses before comparing maximum LTV limits.
Second charge lending
A second charge assessment may use combined loan-to-value.
This combines the existing first mortgage with the proposed second charge:
- Property value: £400,000
- First mortgage: £220,000
- Proposed second charge: £60,000
- Total secured borrowing: £280,000
- Combined LTV: 70%
These cases also require separate affordability and suitability assessments.
LTV Is Not the Same as Affordability
LTV measures secured borrowing against property value.
Affordability assesses whether the client can maintain the required repayments.
A client may have a large deposit and low LTV but insufficient affordable income. Another client may pass affordability but require a product at a higher LTV.
A complete assessment should consider:
- Loan-to-value
- Income and expenditure
- Credit commitments
- Mortgage term
- Repayment method
- Property suitability
- Deposit source
- Lender criteria
The percentage helps define the route. It does not replace advice or underwriting.
Broker Checklist for LTV Cases
Before researching or submitting a case, confirm:
- Is the correct property value being used?
- Is the calculation based on the purchase price or valuation?
- Does the loan include fees or retained interest?
- Is the client raising additional capital?
- Has the deposit source been verified?
- Does the property meet the lender’s criteria?
- Has affordability been assessed separately?
- Does the application sit close to an LTV boundary?
- Are the figures supported by the client’s documents?
- Does the case require specialist packaging?
Where a case includes unusual income, adverse credit, specialist property or tight timescales, Connect’s mortgage packaging support for brokers may help with case placement and lender-ready preparation.
How a Mortgage Network Supports LTV-Led Cases
The value of a mortgage network is not the calculation itself. The value lies in interpreting what that calculation means across different lenders.
An adviser may need support with:
- Lender criteria research
- Product and LTV limits
- Specialist case placement
- Application packaging
- Compliance processes
- Complex property types
- Referral routes
Connect’s adviser services support brokers across mainstream and specialist mortgage cases.
Connect network advisers can also gain greater consumer visibility through the Connect Experts mortgage adviser directory. Clients can search for advisers by location, mortgage need and personal preferences.
A Percentage Must Be Read in Context
LTV gives structure to the early assessment of a mortgage case. Yet the figure becomes useful only when it is considered alongside the client, property and lending purpose.
Good case placement begins with accurate numbers. Good advice begins by understanding what those numbers mean.
Experienced advisers seeking lender access, compliance support, technology and specialist case assistance can learn more about how to join the Connect mortgage network.
Frequently Asked Questions
How do brokers calculate loan-to-value?
Divide the required mortgage by the property value and multiply the result by 100. A £240,000 mortgage against a £300,000 property produces an 80% LTV.
Is a lower LTV always better?
A lower LTV may provide access to more products or different pricing. It does not guarantee approval because affordability, credit history and property criteria still apply.
Can a lender valuation change the LTV?
Yes. If the lender values the property below the purchase price, the requested mortgage represents a higher proportion of the property’s assessed value.
What is combined loan-to-value?
Combined LTV compares all lending secured against a property with its value. It is commonly considered where a first mortgage and second charge are both present.