In short
- LTV is the loan as a share of the property's assessed value — not the price you agreed.
- The remainder is the margin, which you fund, along with stamp duty, registration and other costs.
- A higher LTV means less cash upfront but more borrowing; it is a trade-off, not a free choice.
What LTV actually measures
Loan-to-value is the loan divided by the value of the property. If a lender agrees to an LTV of a given share, it is telling you what portion of the property's assessed value it will fund — and, by implication, what portion you must fund yourself.
Why assessed value is not the price
The value in the ratio is the lender's own valuation, not the price you negotiated. A valuation is the lender's view of what the property is realistically worth as security, and it can come in below your agreed price — especially in a rising market, or for a property that is unusual or hard to compare.
When that happens, the loan shrinks but the price does not. The gap is yours to fund.
A valuation lower than your agreed price is the most common surprise at sanction. Budget for it before you commit, not after.
The margin, and what else you fund
The part the lender will not fund is the margin, and it is only one of the costs that sit outside the loan.
- The margin — the difference between the loan and the property value, and any gap between valuation and price.
- Stamp duty and registration, which are statutory and are not financed.
- The lender's processing fee, plus legal, technical and valuation charges.
- Insurance, and any costs specific to the transaction or the property.
Why LTV matters to the terms
A loan at a higher LTV gives the lender a thinner cushion, because the amount owed sits closer to the value of the security. Lenders read that as more risk, and risk shapes pricing and conditions. Two borrowers on the same day can be offered different terms partly because their LTVs differ.
How to plan for it
Work out the total cash you will need — margin, stamp duty, registration, fees and a buffer — before you commit to a price. Do not spend everything you have on the down payment and leave nothing for the costs that arrive later or for the valuation gap if it appears.
Questions this raises
Is a higher LTV bad?
- It is neither good nor bad in itself. It means less cash upfront and more borrowing, so the question is what you can comfortably service.
Can the valuation come in lower than the price?
- Yes. When it does, the shortfall becomes part of the cash you must arrange yourself.
Read the full guidance on home loan.