Loan-to-Value Calculator

What this calculator is, and when to reach for it

Loan-to-value is the ratio that quietly decides most of what a lender offers you, and almost nobody thinks about it until it costs them money. It is simply the loan expressed as a percentage of the property’s value. Borrow 320,000 against a home worth 400,000 and your loan-to-value is 80%. That single figure influences the rate you are quoted, whether mortgage insurance applies, and whether a remortgage is available at all.

It exists because it measures the lender’s exposure rather than yours. If a loan represents 95% of a property’s value, a modest fall in prices leaves almost no margin between the debt and what the property would fetch. At 60%, the same fall is absorbed comfortably. Lenders price that risk, and they price it in bands rather than smoothly.

The banding is the practical insight worth carrying away. Moving from 81% to 80% can change your terms materially, while moving from 74% to 68% may change nothing at all. Whether a few thousand more deposit is transformative or irrelevant depends entirely on where you sit relative to the nearest boundary.

Use this page when you are sizing a deposit, when you are wondering whether you can drop mortgage insurance yet, before applying to remortgage, or whenever you want to know what your position looks like from the lender’s side of the table.

The two ways your ratio improves

It falls when the balance falls, which happens through ordinary repayment and faster through overpayment. And it falls when the property value rises, which happens through the market or through work you do to the place. The first you control, the second you mostly do not.

Both count when you come to remortgage, but they are not treated identically. A lower balance is a matter of record. A higher value usually requires a lender to accept a new valuation, and lenders vary in how readily they do so, particularly when the increase is recent or driven by improvements rather than the market.

This is why two households with the same original loan can end up on very different rates a few years later. One overpaid and requested a revaluation; the other did neither and stayed in a worse band by default.

Where to go next

To work backwards from a target ratio to the deposit it requires, use the down payment calculator. If you hold more than one loan against the property, the combined loan to value calculator adds them together, which is the figure a lender actually assesses.

To see the ratio improving over time, the amortization calculator shows the balance year by year, and the extra payment calculator shows how much faster overpaying moves you between bands. The home equity calculator expresses the same position as a positive number rather than a ratio.

When a better band is within reach, the refinance calculator and the break-even calculator tell you whether acting on it is worth the cost of switching.

How the ratio is worked out

The arithmetic is a single division. Everything interesting is in which two numbers you divide.

LTV = (loan amount ÷ property value) × 100

loan amount

the balance outstanding, or the loan being applied for

property value

the lender’s valuation, which may differ from a price agreed or hoped for

Which value a lender uses

On a purchase, lenders almost always use the lower of the agreed price and their own valuation. Paying above valuation therefore does not raise the value in the calculation; it simply increases the cash you must find, because the lender lends against the smaller figure.

On a remortgage there is no price, so the valuation is the value, and how it is arrived at matters. Some lenders accept an automated estimate, others require a physical inspection. An owner’s own view of what the property is worth carries no weight in the calculation.

Why the bands exist and where they usually fall

Lenders group risk rather than pricing every ratio individually, so terms tend to change at round numbers: 95%, 90%, 85%, 80%, 75%, and 60% are common boundaries, though the exact set varies by lender and by country. Within a band, terms are typically flat.

The 80% line carries the most weight in many markets because it is where mortgage insurance commonly ends. Below that, further improvements usually buy rate rather than removing a whole cost, which is a smaller but still real gain.

What the ratio is not

It says nothing about whether you can afford the loan. A borrower with a 50% ratio and no income is a worse prospect than one at 90% with a secure salary, and lenders assess capacity separately through debt-to-income and their own affordability rules.

It is also not equity, though the two are close relatives. Equity is the value less the debt, expressed as an amount; loan-to-value is the debt over the value, expressed as a percentage. An 80% ratio and 20% equity describe the same position from opposite directions.

When the ratio goes above 100%

If the balance exceeds the value, the ratio passes 100% and equity is negative — commonly described as being underwater. It usually follows a fall in prices, a very small original deposit, or both.

It is not a default and does not by itself trigger any action from a lender while payments continue. It does, however, close off remortgaging and make selling difficult, because completing a sale would require finding the shortfall in cash. Time and continued repayment are the usual remedies.

What this page assumes

This calculator divides the loan amount by property value and expresses the result as a percentage.

It accepts zero and above-100% ratios but does not predict lender eligibility.

Worked examples, step by step

Take a property valued at 400,000 with a loan of 320,000 against it. The ratio is 320,000 ÷ 400,000 = 80%, and the equity is 80,000, or one fifth of the property.

That is a comfortable position. It sits exactly on the boundary where mortgage insurance typically ends and better pricing begins, which is why one fifth is so often quoted as the deposit to aim for.

The same loan against different valuations

Nothing about the loan changed across those three rows. A rise in value to 450,000 moves the ratio to 71.1% and pushes the borrower into a better band without a single extra payment being made. A fall to 380,000 pushes them back above 80%, where insurance may reappear on a remortgage.

This is the uncomfortable truth about loan-to-value: a meaningful part of it is outside your control. What you can control is the balance, which is why overpaying has an effect beyond the interest it saves — it buys resilience against exactly this kind of movement.

How long ordinary repayment takes to move you

On a 350,000 loan at 6.5% over thirty years, the balance after ten years is 296,716.44. Against an unchanged value of 400,000 that is a ratio of 74.2%, down from 87.5% at the start. A decade of payments moved the borrower through roughly one and a half bands.

If the property had also risen to 450,000 over that decade, the ratio would be 65.9%, deep into better pricing territory. Repayment and appreciation together move faster than either alone, which is the ordinary experience of most long-term owners.

The vocabulary, on and around this page

Loan to value

The loan expressed as a percentage of the property value. It measures the lender’s exposure and drives pricing and insurance.

Combined loan to value

The same ratio counting every loan secured on the property, not just the first mortgage. This is what a lender assesses.

Equity

The property value less what you owe, expressed as an amount. It is the mirror image of loan-to-value.

Valuation

A lender’s assessment of what the property is worth. On a purchase, lenders use the lower of valuation and agreed price.

Band

A range of loan-to-value within which lender terms are flat, with pricing changing in steps at the boundaries.

Mortgage insurance

A premium commonly required above about 80% loan-to-value. It protects the lender and adds nothing to your equity.

Underwater

Owing more than the property is worth, meaning a ratio above 100% and negative equity. It blocks remortgaging and complicates selling.

Negative equity

The amount by which the debt exceeds the property value. It is not a default, but it removes most refinancing options.

Down payment

The cash contributed up front. It sets your starting loan-to-value on day one of the loan.

Appreciation

A rise in property value over time. It lowers loan-to-value without any payment being made, though a lender must accept a new valuation.

Depreciation

A fall in property value, which raises loan-to-value and can undo years of repayment on paper.

Outstanding balance

What you currently owe. It is the numerator of the ratio and the part you can influence directly.

Remortgage

Replacing an existing loan with a new one, often to secure a better rate. Loan-to-value largely determines what is available.

Automated valuation

An estimate of value produced from market data rather than an inspection. Some lenders accept it, others require a physical valuation.

Second charge

An additional loan secured on the same property, ranking behind the first. It raises the combined ratio.

Home equity line

A revolving facility secured on the property. Lenders cap it by combined loan-to-value rather than the first mortgage alone.

Affordability

Whether your income supports the payments. It is assessed separately from loan-to-value, and both must satisfy a lender.

Debt to income

The share of income committed to debt payments. A strong loan-to-value does not compensate for a weak ratio here.

Cash out

Borrowing more than you currently owe when refinancing, taking the difference in cash. It raises loan-to-value immediately.

Threshold

A boundary between bands, commonly at 95%, 90%, 85%, or 80%. Crossing one changes terms in a step rather than gradually.

Common mistakes, and what this page will not do

• Using your own estimate of the value. Lenders use their valuation, and on a purchase the lower of valuation and price. An optimistic figure produces a ratio no lender will recognise.
• Counting only the first mortgage. Any additional loan secured on the property counts. Lenders assess the combined ratio, which is often the one that matters.
• Assuming mortgage insurance ends automatically. Reaching a threshold rarely removes it by itself. It usually has to be requested, and may require a fresh valuation.
• Ignoring how close you are to a boundary. Terms change in steps. A small overpayment near a threshold can be worth far more than a large one in the middle of a band.
• Treating a good ratio as approval. It measures the lender’s exposure, not your capacity to pay. Income and existing debts are assessed entirely separately.
• Relying on an unverified rise in value. A higher valuation only counts once a lender accepts it. Recent increases and improvement-driven gains are scrutinised more closely.
• Panicking about being underwater. Owing more than the value is not a default and triggers nothing while payments continue. It does close off remortgaging and complicate a sale.
• Forgetting a cash-out raises the ratio. Taking equity out increases the balance immediately and can move you into a worse band with worse pricing.
• Comparing thresholds across countries. The bands and the rules attached to them differ by market and by lender. Figures quoted for one country may not apply to yours.

What this calculator leaves out: This calculator divides the loan you enter by the value you enter. It does not verify or produce a valuation, calculate mortgage insurance premiums, predict property prices, assess affordability or credit, apply any specific lender’s bands, or determine eligibility for any product. It accepts ratios of zero and above 100%.

Frequently asked questions