LTV is the first number every lender looks at. It tells them how much risk they are taking. It should be the first number you look at too.
Loan to Value is your mortgage amount divided by the property value, expressed as a percentage. A £150,000 mortgage on a £200,000 property gives you a 75% LTV. A £170,000 mortgage on the same property gives you 85% LTV.
LTV determines everything about your mortgage: how much you can borrow, what interest rate you get, and whether the lender says yes at all. In the current market, most BTL lenders cap at 75% LTV. Some go to 80%. Anything above that is specialist lending with higher rates.
LTV also determines your equity. If your property is worth £250,000 and your mortgage balance is £150,000, your LTV is 60% and your equity is 40%. When your LTV drops below 60%, you have enough equity to refinance and pull cash out for your next deal.
The danger is rising LTV. If property prices fall and your mortgage stays the same, your LTV goes up. A property bought at 75% LTV that drops 10% in value now has an 83% LTV. You might not be able to refinance. You might not be able to sell without a shortfall.
Keep your LTV below 75% on every property. That gives you a buffer against market downturns and the flexibility to refinance when you need to.
The formula
LTV (%) = (Loan Amount / Property Value) × 100
Why this matters
LTV determines your borrowing power, your interest rate, and your equity position. Keep it below 75% on every property to maintain flexibility and protect against market drops.
If you want to know exactly what a property is worth before you make an offer, Xelox Properties can help. We run the numbers so you do not have to.