Loan-to-value ratio
The loan-to-value (LTV) ratio is one of the main risk assessment measures used by lenders to assess a person's suitability for a mortgage.
The loan-to-value (LTV) ratio is one of the main risk assessment measures used by lenders to assess a person's suitability for a mortgage. It expresses the loan amount as a percentage of either the purchase price of property or its appraised value.
For example, if you put down a deposit of 30% on a property, the LTV would be 70%. Or, if you're buying a property for £300,000 and the mortgage amount is £240,000, the LTV is 80% (the £240,000 loan divided by the £300,000 purchase price).
The higher the LTV ratio, the less likely a mortgage will be approved as it will be deemed high risk. This is because if borrowers have small equity, they have less to lose and are more likely to default on the mortgage.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Dunelm has done well and looks inexpensive – should you invest?
Home furnishings retailer Dunelm has proved resilient and looks inexpensive
-
QXO: a compelling opportunity in the building materials industry
Opinion The boss of QXO knows how to make a few billion dollars, and aims to repeat the trick. Investors would be wise to back him, says Jamie Ward