What Is LTV?
LTV (Loan-to-Value) is the percentage of the property value you're borrowing. If a house costs £200,000 and you put down £40,000, your LTV is 80% (you're borrowing £160,000, which is 80% of the value).
Formula
LTV = (Loan Amount ÷ Property Value) × 100. Lower LTV (smaller loan, larger deposit) means lower risk for lenders—and lower interest rates for you.
Standard Deposit Tiers and Rates (2026)
While rates vary by lender and your personal circumstances, here's a typical picture:
| Deposit % |
LTV |
Typical Rate Range |
Common Lenders |
| 5% |
95% |
5.5%–6.5% |
Limited availability; check specialist |
| 10% |
90% |
5.0%–5.75% |
Most major lenders |
| 15% |
85% |
4.75%–5.5% |
Most major lenders |
| 20% |
80% |
4.5%–5.25% |
Widest range of lenders |
| 25%+ |
75% or less |
4.25%–5.0% |
Best rates; premium mortgages available |
Note: These are approximate ranges. Your actual rate depends on credit score, income stability, property type, and market conditions. Use the calculator to see how different deposit sizes affect your specific situation.
Why Deposit Size Matters
A larger deposit reduces lender risk and benefits you in several ways:
- Lower Interest Rates: Each 5% increase in deposit typically saves 0.25–0.5% on your interest rate
- Wider Lender Choice: Below 80% LTV, you access premium lenders with better rates
- Lower Monthly Payment: Borrowing less principal means smaller monthly payments
- Less Interest Paid Long-Term: A 5% rate difference costs tens of thousands in interest over 25 years
- Faster Equity Building: You own more of your home from day one
- Protection Against Negative Equity: If property values drop, you're protected
The Cost of Different Deposits: Example
Let's say you're buying a £250,000 property over 25 years. Here's the real cost difference:
Scenario: 5% Deposit (95% LTV)
Deposit: £12,500 | Borrow: £237,500 | Rate: 6.0% | Monthly Payment: £1,419 | Total Interest Paid: £189,700
Scenario: 10% Deposit (90% LTV)
Deposit: £25,000 | Borrow: £225,000 | Rate: 5.5% | Monthly Payment: £1,290 | Total Interest Paid: £161,000
Scenario: 20% Deposit (80% LTV)
Deposit: £50,000 | Borrow: £200,000 | Rate: 4.75% | Monthly Payment: £1,095 | Total Interest Paid: £128,500
Scenario: 25% Deposit (75% LTV)
Deposit: £62,500 | Borrow: £187,500 | Rate: 4.5% | Monthly Payment: £1,019 | Total Interest Paid: £115,700
The Takeaway: Increasing your deposit from 5% to 20% saves £61,200 in interest, plus £324/month. The deposit difference (£37,500) is recovered in just 6 years through lower payments.
Minimum Deposit Requirements
First-Time Buyers: Most lenders require at least 5–10% deposit. Some specialist lenders offer 95% LTV (5% deposit), but rates are higher. 10–15% is common for better rates.
Buy-to-Let Investors: Typically 20–25% deposit required. Lenders treat rental properties as higher risk.
Remortgage: No deposit requirement—you're refinancing existing equity.
Strategy: If you can only afford 5%, consider saving 6–12 more months to reach 10%. The rate savings and lower monthly payment will be worth the wait.
Gifted Deposits and Family Help
If family gifts you deposit money, most lenders accept it, but you'll need to provide:
- A signed letter from the gifter stating it's a gift (not a loan)
- Bank statements showing the money transfer
- Proof that the gifter can afford to give it (no impact on their finances)
Important
The money must be genuinely gifted—if repayment is expected, lenders will treat it as a loan and factor it into your affordability assessment. This can reduce how much you can borrow.
Mortgage Insurance (Protection When LTV is High)
When your LTV exceeds 80%, lenders require mortgage insurance (also called "lenders' mortgage insurance"). This protects the lender if you default—but the cost comes from you.
Mortgage Insurance Cost
Insurance premiums typically range from 0.5% to 3% of the loan amount, depending on LTV. At 95% LTV, you might pay 3% insurance (£7,125 on a £237,500 loan). This can be added to your loan balance, increasing your total borrowing.
Note: Mortgage insurance protects the lender, not you. It's not the same as payment protection insurance (PPI). The cost is one reason high-LTV mortgages become expensive quickly.
Deposit Strategy: Balancing Speed vs. Savings
The deposit question is often: "Buy now with 5% or wait for 20%?" The answer depends on your circumstances:
Buy Now (5–10% Deposit)
Pros: Get on the property ladder sooner; potential property price appreciation. Cons: Higher interest rate; larger monthly payment; more total interest paid; higher mortgage insurance costs.
Wait and Save (15–20% Deposit)
Pros: Better interest rates; lower monthly payments; less total interest; wider lender choice; faster equity building. Cons: Delay ownership; risk of property prices rising further; opportunity cost of rent.
Rule of Thumb: If you can save 6–12 more months to reach 15–20%, it's usually worth it. If property prices are rising fast or you expect significant life changes (marriage, job relocation), buying sooner may make sense despite higher costs.