Understanding Loan-to-Value Ratios: Maximising Your Borrowing Potential

When it comes to securing property finance, there’s one number that lenders pay close attention to: the Loan-to-Value ratio (LTV).

Whether you’re a first-time investor or expanding your property portfolio, understanding how LTV works – and how to improve it – can make a significant difference to the amount you can borrow, the interest rate you’re offered, and your long-term returns.

So, let’s break down what LTV means, why it matters, and how to use it to your advantage when securing specialist property finance.

What is Loan-to-Value (LTV)?

The Loan-to-Value ratio is a percentage that compares the size of your loan to the value of the property you’re buying or refinancing.

LTV Formula:

Loan amount ÷ Property value × 100 = LTV

Example:

If you’re borrowing £300,000 to purchase a property worth £400,000, your LTV is 75%.

Why LTV Matters in Property Finance

Lenders use LTV to assess the risk of a loan. A higher LTV means the borrower is contributing less of their own money, which increases the lender’s risk if the borrower defaults or the property drops in value.

Here’s how LTV affects your financing:

1. Borrowing Capacity

Most lenders have a maximum LTV cap based on the property type and loan purpose. For example:

• Residential mortgages may allow up to 95% LTV
• Buy-to-let mortgages typically go up to 80-85%
• Bridging loans and development finance might reach up to 70–75% or even 90% with additional security

2. Interest Rates

Lower LTV = lower risk = lower rates.

Lenders often offer tiered pricing, so if your LTV is 60% instead of 75%, you’ll likely benefit from a significantly better interest rate.

3. Lender Choice

A more favourable LTV can open the door to a wider range of lenders, giving you more flexibility and potentially better terms. If your LTV is too high, you may be restricted to specialist lenders or face tougher criteria.

How to Optimise Your LTV

1. Increase Your Deposit or Equity

If you’re purchasing, putting down a larger deposit will instantly lower your LTV. If you’re refinancing, a strong uplift in property value or previous repayments can improve your equity position.

2. Add Value Through Refurbishment

Investors using refurbishment finance can often borrow based on the property’s end value (GDV), not just the current value. This can help you access higher amounts with a more attractive LTV ratio.

Learn more about refurbishment and development finance

3. Consider Additional Security

Some lenders offer higher LTVs if you can provide additional assets as security – useful for investors looking to stretch their borrowing capacity without inflating risk for the lender.

4. Work with a Specialist Broker

Every lender calculates risk differently. A broker who understands the full lending landscape – and your investment goals – can identify the lenders most likely to offer favourable LTV-based terms.

At Pure Property Finance, we specialise in helping clients navigate the complex world of property finance – whether you need a 90% LTV bridging loan, development finance based on GDV, or help structuring a deal with multiple securities.

We work with a wide panel of specialist lenders and understand exactly how to position your application to maximise borrowing potential while keeping terms competitive.

Contact us today for expert guidance on securing the best finance solution for you.