Loan-to-Value (LTV)
How much of the property is borrowed and how much is yours, and which side of the 80% line you are on.
Recent
Formula
How the calculation works
LTV is the loan as a share of the property's value, and it moves two things at once: the rate a lender offers and whether mortgage insurance is required. The 80% line is the one that matters most, because crossing it usually adds a monthly cost that stays until the loan falls below it again.
Because the value can move while the loan does not, LTV is not fixed at purchase. A rising market can carry a borrower under the insurance threshold without a penny of extra repayment, which is why a fresh valuation is worth asking for.
Common mistakes
- Treating LTV as fixed at purchase. A new valuation can move it, and it is the valuation, not the balance, that a lender prices on.
- Paying a lump sum to cross 80% without checking whether a valuation would have done it for nothing.
When to use it
- Use it when you know the value and the loan and want to see the equity and how far you sit from the 80% line.
- It is also the tool for the deposit question: change the deposit and watch the LTV fall towards the threshold where insurance drops away.
Worked example
A 240,000 loan on a 300,000 property is 80% LTV, leaving 60,000 of equity, or 20%.
Common questions
Why does 80% matter?
In many markets an LTV above 80% triggers mortgage insurance, which raises the monthly cost. Dropping below 80% removes it.
Does a rising value lower LTV?
Yes. The loan stays the same while the value rises, so the LTV falls and can carry you under the insurance threshold. A fresh valuation is what captures that.
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