Loan to Value Explained: How to Calculate LTV for CeMAP

Loan to value (LTV) is the first calculation most CeMAP® candidates learn and one they keep using through all of CeMAP 2 and the CeMAP 3 case studies. MRT1 tests it in AC7.1 (higher lending charges, guarantors and surety) and AC8.2 (the higher lending charge as a fee), and MRT2 tests it in AC1.1 and AC1.2 (further advances and remortgages). This guide gives the formula, three worked examples and the mistakes that cost marks. LTV is lender practice rather than a statutory rule, so it works the same way in England, Wales, Scotland and Northern Ireland. For the module overview, see the CeMAP 2 (MORT) hub; for the unit, the MRT1 unit guide.

LTV at a glance	Detail
Formula	LTV = loan ÷ value × 100
Value used	The lower of the purchase price and the lender's valuation (standard lender practice)
Deposit percentage	100% − LTV
Syllabus	MRT1 AC7.1, AC7.2, AC8.2; MRT2 AC1.1, AC1.2; ASEW AC1.2
Related ratio	Loan to income (LTI) = loan ÷ gross income

Source for the criteria: the CeMAP qualification specification, Appendices 3 and 4.

What is loan to value?

Loan to value is the size of a mortgage as a percentage of the property's value. A £180,000 loan on a £200,000 home is 90% LTV, and the other 10% is the buyer's deposit or equity. CeMAP MRT1 tests it in AC7.1 and AC8.2.

The lower the LTV, the bigger the cushion of equity between the loan and the value of the security. If a borrower defaults and the lender sells the home, that cushion absorbs falls in price and the costs of sale. A lender at 60% LTV can lose 40% of the value before it loses money; a lender at 95% LTV has only 5%.

That is why LTV drives so many lending decisions in MRT1:

• Price. Lenders set rates in LTV bands.
• Fees. Some charge a higher lending charge above a threshold (AC8.2).
• Extra security. A guarantor or other additional security may be required at high LTV (AC7.1).
• Eligibility. Every product has a maximum LTV, and specialist products, such as new-build flats, adverse credit or buy-to-let, tend to have lower ones.

The equity a borrower holds is the other side of the same number. On a £300,000 home with a £195,000 mortgage, LTV is 65% and the equity is £105,000, or 35%.

Key fact: Deposit percentage and LTV always add up to 100%. A 15% deposit means 85% LTV.

How do you calculate LTV?

LTV is calculated by dividing the loan by the property value and multiplying by 100. Lenders use the lower of the purchase price and their valuation, so a £225,000 loan on a home bought for £250,000 but valued at £240,000 is 93.75% LTV, not 90%.

Worked example 1: a purchase with a down-valuation

Sam agrees to buy a house for £250,000 with a £25,000 deposit, so he needs a £225,000 loan. His lender's maximum is 90% LTV.

1. LTV on the price: £225,000 ÷ £250,000 × 100 = 90%. That is within the limit.
2. The lender's valuation comes in at £240,000. LTV is now based on the lower figure: £225,000 ÷ £240,000 × 100 = 93.75%. That breaks the 90% limit.
3. Maximum loan at 90% of £240,000 = £216,000.
4. Sam must find £250,000 − £216,000 = £34,000, an extra £9,000, or renegotiate the price.

The valuation protects the lender, not the buyer. It does not report on the condition of the home, which is the job of a survey; see our property surveys guide.

Fees added to the loan

If Sam's lender lets him add a £999 product fee to the £216,000 loan, the loan becomes £216,999 and LTV rises to 90.4%. Many lenders cap the loan including fees at the product's maximum, so adding fees can push a case over a band.

Exam tip: Always divide by the lower of price and valuation. Questions put the higher figure first to catch candidates who use it.

How do you work backwards from LTV to a deposit or a loan?

Working backwards from LTV uses the same formula rearranged: loan = value × LTV, deposit = value × (100% − LTV), and maximum price = deposit ÷ (100% − LTV). At 85% LTV on a £280,000 home, the loan is £238,000 and the deposit £42,000.

You know	You want	Method	Example
Value and LTV	Loan	Value × LTV	£280,000 × 85% = £238,000
Value and LTV	Deposit	Value × (100% − LTV)	£280,000 × 15% = £42,000
Deposit and LTV	Maximum price	Deposit ÷ (100% − LTV)	£30,000 ÷ 10% = £300,000 at 90% LTV
Loan and maximum LTV	Minimum value	Loan ÷ LTV	£180,000 ÷ 75% = £240,000

The third row is the one candidates find hardest. A buyer with £30,000 saved and a lender lending up to 90% LTV can afford a price of up to £300,000 on deposit grounds, because £30,000 is 10% of £300,000. Whether they can afford the monthly payments is a separate question, covered on our mortgage affordability guide.

Remember that the deposit is not the only cash a buyer needs. MRT1 AC8.1 lists the purchase costs, including stamp duty, legal fees and searches, and those come on top.

Key fact: Maximum price = deposit ÷ deposit percentage. £20,000 at 95% LTV supports a £400,000 price on deposit alone.

How does LTV affect the rate, the fees and the higher lending charge?

LTV affects pricing because lenders set rates in bands, such as 60%, 75%, 85%, 90% and 95%, with higher rates in higher bands. Above a threshold, some lenders also charge a higher lending charge, an AC8.2 fee that insures the lender against loss.

Rate bands

A fall of a few thousand pounds in the loan can cut the rate if it moves the case into a lower band. A borrower at 75.5% LTV who reduces the loan to 75% may get a noticeably cheaper deal. That is why advisers check whether a small extra deposit, or a fee paid upfront rather than added, crosses a band.

The higher lending charge

A higher lending charge (HLC) is a one-off fee on a high-LTV loan that pays for insurance protecting the lender. Lenders that charge it calculate it on the part of the loan above their threshold. Using our own illustrative terms:

1. Loan £190,000 on a £200,000 home: 95% LTV.
2. The lender's threshold is 75%: £200,000 × 75% = £150,000.
3. Amount above the threshold: £190,000 − £150,000 = £40,000.
4. Charge at 7% of the excess: £40,000 × 7% = £2,800.

The borrower pays, but the policy protects the lender. If the lender repossesses and sells at a loss, the insurer pays the lender and may then pursue the borrower for the money it paid, under its right of subrogation (MRT2 AC5.1). Many lenders today build the risk into the rate instead of charging an HLC.

The Mortgage Guarantee Scheme

The government's 2025 Mortgage Guarantee Scheme has been permanent since July 2025. It offers lenders a government guarantee on residential repayment mortgages at 91% to 95% LTV, according to the gov.uk scheme page. Like an HLC, it protects the lender, not the borrower.

Exam tip: The higher lending charge protects the lender, even though the borrower pays for it. "Protects the borrower" is the classic wrong answer.

What is the difference between LTV and LTI?

LTV measures the loan against the property's value; LTI, loan to income, measures it against gross income. A £180,000 loan for a buyer earning £45,000 is 4.0 times income. The Bank of England limits lending at 4.5 times income or more to 15%.

LTV is a security test: if the borrower defaults, does the home cover the debt? LTI is an income test: how stretched is the borrower? A case can pass one and fail the other. A buyer with a 40% deposit and a low income has a low LTV and a high LTI.

The LTI flow limit applies across the market. No more than 15% of new mortgages, in aggregate, may be at 4.5 times income or more. From 28 October 2026 the limit applies only in aggregate, so an individual lender may exceed 15% while the market stays within it, as set out in the PRA's high loan-to-income policy statement.

Ratio	Formula	Example	What it tests
LTV	Loan ÷ value	£180,000 ÷ £200,000 = 90%	Security
LTI	Loan ÷ gross income	£180,000 ÷ £45,000 = 4.0×	Stretch on income
LTI at the limit	Loan ÷ gross income	£200,000 ÷ £40,000 = 5.0×	Counts towards the 15%

Neither ratio is the affordability assessment. MCOB 11.6 requires lenders to check net income against actual spending and a stressed rate, and the MCOB 11.6 rules say an income multiple on its own does not show affordability.

Key fact: LTI uses gross income. The MCOB affordability assessment uses net income, after tax and National Insurance.

How is LTV used for further advances and remortgages?

For a further advance or a remortgage, LTV is the total secured borrowing, the existing balance plus any new money, divided by the current valuation. MRT2 AC1.1 and AC1.2 test both, because raising money increases LTV even when the property has risen in value.

Worked example 2: a further advance

Priya's home is valued at £300,000 and she owes £150,000, which is 50% LTV. She asks her lender for a £45,000 further advance to build an extension.

1. New total borrowing: £150,000 + £45,000 = £195,000.
2. New LTV: £195,000 ÷ £300,000 × 100 = 65%.

The further advance is usually on a separate rate and is assessed for affordability like new lending. Further advances have their own MCD disclosure rules in MCOB 7B.

Worked example 3: a remortgage with capital raising

Dan's home is valued at £320,000. He owes £180,000 and wants to remortgage to a new lender and raise £40,000.

1. New loan: £180,000 + £40,000 = £220,000.
2. New LTV: £220,000 ÷ £320,000 × 100 = 68.75%.
3. If the new lender's best rate stops at 65%, the maximum loan for that rate is £320,000 × 65% = £208,000, so Dan could raise £28,000 at that rate, or £40,000 at the next band's rate.

LTV also falls over time without any action. If the balance on a £300,000 home falls to £200,000, the LTV is 66.7%; if the home rises to £330,000 at the same time, it is 60.6%. That is why many borrowers find a cheaper rate when a deal ends. Our CeMAP calculations page has more examples.

Exam tip: Add the new borrowing to the existing balance before dividing. Dividing only the new money by the value is a common error.

What LTV limits apply to buy-to-let and equity release?

No regulator sets a maximum LTV for buy-to-let or equity release. Lenders set their own: buy-to-let maximums are typically lower than for owner-occupiers, and lifetime mortgage maximums rise with the borrower's age. Both are tested in MRT2 AC6.3 and ASEW AC2.5 and AC4.3.

Buy-to-let. Buy-to-let lenders typically ask for a larger deposit than residential lenders. In practice the rent often caps the loan first: the interest cover ratio test compares the expected rent with a stressed interest cost, and a property with modest rent may support a loan well below the lender's maximum LTV. Our buy-to-let mortgages guide works through a rental cover calculation.

Equity release. A lifetime mortgage starts at a low LTV and the LTV rises over time, because interest rolls up and is added to the balance. Providers publish maximum LTVs by age, higher for older borrowers, because the expected term is shorter. The no negative equity guarantee, an Equity Release Council standard, means the debt can never exceed the sale price of the home, after reasonable sale costs. The roll-up arithmetic is on our equity release guide.

Other specialist products. New-build flats, adverse credit and self-build loans often carry lower maximum LTVs than standard residential lending. See our types of mortgages guide for each product.

Key fact: On a lifetime mortgage LTV rises over time, even without further borrowing, because unpaid interest is added to the loan.

Which LTV mistakes cost marks in CeMAP?

The LTV mistakes that cost most marks in CeMAP are five: dividing by the higher of price and valuation, confusing LTV with deposit percentage, forgetting existing borrowing on a further advance, ignoring fees added to the loan, and mixing up LTV with LTI.

1. The wrong value. Use the lower of price and valuation. A £250,000 price and £240,000 valuation means you divide by £240,000.
2. Deposit for LTV. A 10% deposit is 90% LTV. Questions offer both numbers.
3. New money only. On a further advance or capital raise, divide the total secured debt, not just the extra amount.
4. Fees added. A fee added to the loan raises the LTV and can push the case into a higher band.
5. Gross vs net. LTI uses gross income; affordability uses net. Mixing them gives a wrong answer that looks plausible.

A sixth, smaller trap: rounding too early. Keep full figures until the last step. £225,000 ÷ £240,000 is 93.75%, which is in a different band from 93%.

Practise these on the MRT1 additional security drill, which covers higher lending charges, and the MRT1 fees drill.

Exam tip: Write the formula down for every LTV question, even easy ones. At 72 seconds a question in MRT1, a written step is faster than a correction.

Your loan to value study plan

Your loan to value study plan takes about 4 hours: learn the formula and the four rearrangements, redo the three worked examples with your own numbers, then answer 20 timed LTV and fee questions at the MRT1 pace of 72 seconds each.

Step	Focus	Practice
1	The formula and "lower of" rule	Redo worked example 1 with a £300,000 price
2	Working backwards	The four rows of the rearrangement table
3	HLC, further advances and remortgages	MRT1 additional security drill
4	Fees and timed practice	MRT1 fees drill and the free MRT1 mock 1

Start with the free MRT1 diagnostic, 20 questions in 30 minutes, then sit mock 1 once the method is automatic. Our free study notes cover the MRT1 topics for revision away from the questions.

Mocks 2 to 10 and the topic drills are part of Pro: £6.99 a week, £11.99 a month or £22.99 for three months, for all five units. Our readiness rule is three mocks in a row at 85% or more, with every topic at 80% or more. It is a guide, and there is no pass guarantee.