What is loan-to-value? How your deposit shapes what you can borrow
By SendPay Business · · 2 min read
Loan-to-value, or LTV, is the size of a loan as a percentage of the value of the property or asset it is secured on. It is one of the main numbers a lender looks at when deciding whether to lend and at what rate.
How to work it out
- Divide the loan by the value, then multiply by 100.
- A £180,000 loan on a £200,000 home is 90% LTV.
- Your deposit is the rest: here £20,000, or 10%.
Why lenders care
The lower the LTV, the more of the value is covered by the borrower's own money. If prices fall or the borrower can't repay, the lender is more likely to get its money back. Many lenders set their rates in LTV bands, with lower rates for bigger deposits.
Equity and changing LTV
Equity is the share of the property you own outright: its value minus what you still owe. As you repay the loan, or if the value rises, equity grows and LTV falls. If the value falls, LTV rises, and if the loan becomes larger than the value this is called negative equity.
Beyond mortgages
The same idea is used for other secured lending, such as car finance and business loans secured on property. In crypto lending, a similar ratio compares a loan with the value of the coins put up as collateral.
Where SendPay fits
SendPay platforms include GBP, EUR and USD accounts and international transfers under your own brand, powered by licensed partners. SendPay doesn't offer lending.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.