Loan-to-value ratio (LTV)
The ratio of the loan amount to the value of the property held as security, expressed as a percentage. An LTV of 80% means the bank finances 80% of the property value and the borrower provides 20% equity. The higher the LTV, the greater the bank's risk. Banks use this indicator to price the guarantee (Crédit Logement applies a scale based on LTV) and to modulate their risk policy.
Key points
- LTV is calculated by dividing the loan amount by the property value, expressed as a percentage.
- An LTV below 80% is generally associated with better rate and guarantee conditions.
- Crédit Logement adjusts its pricing based on LTV brackets.
- Banks apply different maximum LTV thresholds depending on the profile (primary residence, buy-to-let).
Frequently asked questions
How can a borrower reduce their LTV to strengthen their application?
The most direct approach is to increase the personal contribution, which mechanically reduces the financed share. Alternatively, the property value can be supported upwards through an independent appraisal if market value exceeds the purchase price. The broker analyses both levers before deciding on the presentation strategy.
Why is LTV treated differently for a buy-to-let property?
A buy-to-let investment is seen as riskier than a primary residence because the borrower may choose to prioritise the latter in financial difficulty. Banks therefore often impose a lower maximum LTV and require a higher contribution for this type of transaction.
Does the LTV influence the interest rate offered by the bank?
Yes, LTV is one of the risk-pricing parameters. A high LTV means the bank would recover less in the event of default and forced sale, justifying a risk premium. Some banks apply a formal pricing grid based on LTV brackets; others adjust the rate less formally.
In practice
For a property valued at €250,000, a loan of €200,000 gives an LTV of 80%. By adding €25,000 to the down payment and borrowing €175,000, the LTV falls to 70% and the bank offers a more favourable rate.
Official sources
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr