Calculate your LTV ratio, identify which mortgage rate band you fall into, see maximum loan amounts at standard thresholds, and find how much extra deposit crosses the next tier.
LTV is the ratio of the loan amount to the appraised value of the property. A EUR 320,000 mortgage on a EUR 400,000 property gives an LTV of 80%. The remaining 20% is your equity or deposit. LTV is the single most important metric lenders use to assess mortgage risk because it determines how much buffer exists if property prices fall.
Lenders price risk through rate tiers. Moving from 85% to 75% LTV can reduce the mortgage rate by 0.5 to 1.0 percentage points. Over a 25-year term on a EUR 300,000 loan, a 0.75% rate reduction saves roughly EUR 35,000 to 40,000 in total interest. The deposit to cross a key threshold often pays back many times over.
These thresholds correspond to standardised risk tiers established over decades of loss data. At 60% LTV, a lender can absorb a 40% fall in property prices before suffering a loss on foreclosure. At 95% LTV, a 6% price fall puts the lender in a loss position. Each tier carries a different regulatory capital requirement for the lender, which is directly reflected in the rate they can offer.
Combined LTV adds all loans secured against a property together before dividing by the property value. It matters when you have a first charge mortgage plus a second charge loan or equity line of credit. Second charge lenders look at CLTV rather than just their own loan's LTV because in a default both lenders have claims on the same asset. The second charge lender is repaid only after the first. Most second charge lenders cap CLTV at 80 to 85%.
Yes, in two ways. Every amortising mortgage payment reduces the outstanding principal, lowering the loan in the LTV ratio. Simultaneously, property price movements change the denominator. If your property rises in value while your loan balance falls, LTV drops significantly. Tracking your LTV matters because crossing thresholds downward, for example from 85% to below 80%, can allow you to remortgage to substantially lower rates.