On this page
Loan to value (LTV) is the size of your mortgage as a percentage of your home’s value. It matters a great deal for a bad credit remortgage, because a lower LTV generally means the lender is taking less risk. With adverse credit, a lower LTV can widen the range of lenders that may consider you, while a higher LTV can narrow it.
To work it out, divide the amount you want to borrow by the value of your home and multiply by 100. For example, £150,000 borrowed against a £250,000 home is 60% LTV.
How to calculate your LTV
The formula is:
LTV = (mortgage amount ÷ property value) × 100
A worked example:
- Your home is worth £250,000.
- You want to remortgage for £150,000, the amount you still owe.
- £150,000 ÷ £250,000 = 0.6
- 0.6 × 100 = 60% LTV
The mortgage amount is what you will owe on the new mortgage, not what you originally borrowed. If you are borrowing extra, or adding any fees to the loan, include those in the figure.
What equity means
Equity is the part of your home’s value that you own outright: the value minus what you owe. In the example above, equity is £250,000 minus £150,000, which is £100,000, or 40% of the property value. With one mortgage and nothing else secured on the home, LTV and equity always add up to 100%.
If you have other loans secured on your home, such as a second charge mortgage, lenders commonly look at the total secured borrowing. As you repay your mortgage, and if property prices rise, your equity grows and your LTV falls. If prices fall, the reverse can happen.
How LTV bands work
Lenders do not usually price every percentage point differently. They group mortgages into LTV bands, often in 5% steps, such as up to 60%, up to 65%, up to 70% and up to 75%. Each band can have its own rates and criteria.
That means small changes can matter if they tip you from one band into the next. Being at 75.5% LTV instead of 74.5% could put you in a different band, even though the difference in borrowing is small.
The upper limits for adverse credit vary between lenders and depend on the type and age of the adverse credit, so there is no single maximum that applies to everyone.
Why a lower LTV can widen your options with adverse credit
When a lender considers someone with CCJs, defaults or missed payments, it is taking on more risk. More equity gives it a bigger cushion if the property ever has to be sold. As a result, many lenders tend to:
- set lower maximum LTVs for adverse credit than for clean credit
- lower the maximum LTV further for more serious or more recent adverse credit
- offer a wider choice of products at lower LTVs
This is a general pattern, not a fixed rule. Each lender sets its own limits, and your income, affordability and the details of your credit history matter as well as your LTV. Our guide to what adverse credit is explains how lenders tend to weigh different types of entry.
A worked table: how LTV changes with the amount borrowed
The table below uses a home valued at £250,000. It is illustrative only, to show the maths.
| Mortgage amount | LTV | Equity | Example band (illustrative) |
|---|---|---|---|
| £125,000 | 50% | £125,000 | Up to 50% |
| £150,000 | 60% | £100,000 | Up to 60% |
| £175,000 | 70% | £75,000 | Up to 70% |
| £187,500 | 75% | £62,500 | Up to 75% |
| £200,000 | 80% | £50,000 | Up to 80% |
| £212,500 | 85% | £37,500 | Up to 85% |
How raising extra borrowing changes your LTV
If you remortgage and borrow more, for home improvements or to pay off other debts, the new mortgage is larger, so your LTV rises.
Using the same £250,000 home: you owe £150,000 (60% LTV) and want to borrow an extra £25,000. The new mortgage would be £175,000, which is 70% LTV. That moves you up two 5% bands, and with adverse credit that can reduce the number of lenders that might consider you.
If you are thinking about borrowing more to clear other debts, read our guide on remortgaging to consolidate debt and our page on debt consolidation remortgages. Borrowing more means that debt becomes secured on your home, and a longer term can mean paying more in total.
Why the lender’s valuation may differ from your estimate
Your LTV is based on the lender’s valuation, not what you think your home is worth or what an online estimate says. A remortgage usually involves a valuation arranged by the lender. This may be a desktop or automated valuation based on sales data, or a physical inspection by a surveyor.
Valuations can come in lower than expected, for example if similar homes nearby have sold for less recently. Using the example home:
| Illustrative only | Your estimate | Lender’s valuation |
|---|---|---|
| Property value | £250,000 | £230,000 |
| Mortgage | £150,000 | £150,000 |
| LTV | 60% | 65.2% |
| Example band | Up to 60% | Up to 70% |
A £20,000 difference in value moves this example from 60% to just over 65%, and into a higher band. Before you apply, it can help to search sold prices for similar homes nearby (England and Wales) and to plan your borrowing with some margin.
Other ways to improve your LTV position
- Let your balance fall. Each mortgage payment reduces what you owe. If timing allows, crossing into a lower band before you apply can widen your options.
- Borrow less. Reducing any extra borrowing, even slightly, may bring you under a band threshold.
- Give older adverse credit time. Negative entries drop off your credit file after 6 years, and older issues often carry less weight. See how long a CCJ affects a mortgage.
- Look at staying with your current lender. A product transfer, where you are not borrowing more, may not need a full affordability assessment or a new valuation. If your deal is ending, your mortgage will usually move to the standard variable rate (SVR), which is usually higher, so it helps to compare options a few months ahead.
Frequently asked questions
What LTV do I need for a bad credit remortgage?
There is no single figure. Each lender sets its own maximum LTV, and it often depends on the type, amount and age of the adverse credit. In general, a lower LTV tends to widen the choice of lenders, while a higher LTV can narrow it. Your income, affordability and the rest of your credit file also matter.
Does borrowing more increase my LTV?
Yes. LTV is based on the total you borrow on the new mortgage. For example, on a £250,000 home, increasing a £150,000 mortgage to £175,000 raises the LTV from 60% to 70%. With adverse credit, a higher LTV can reduce the number of lenders that might consider you. See remortgaging to consolidate debt.
What happens if the valuation is lower than I expected?
Your LTV is based on the lender's valuation, so a lower figure pushes your LTV up. For example, a £150,000 mortgage is 60% LTV on a £250,000 home but about 65.2% on a £230,000 valuation. You may need to borrow less, look at other lenders, or consider staying with your current lender through a product transfer.
How do I work out my equity?
Take your home's value and subtract what you owe on your mortgage and any other loans secured on it. On a £250,000 home with a £150,000 mortgage and nothing else secured, your equity is £100,000, or 40% of the value. Your LTV and your equity percentage add up to 100%.