Secured loan LTV calculator

A secured loan LTV calculator works out how much of your property's value you're borrowing against, once your existing mortgage and any new secured loan are added together. Lenders use this figure, alongside your income and credit history, to decide how much they're prepared to lend and on what terms.

Because a secured loan, sometimes called a homeowner loan or second charge mortgage, sits behind your existing mortgage against the same property, lenders always look at the combined borrowing rather than just the new loan on its own. This gives a true picture of how much equity you have left in your home.

Say your property is worth £250,000 and your outstanding mortgage is £125,000. That's an existing LTV of 50%. If you then borrow a further £25,000 as a secured loan, your combined borrowing rises to £150,000, taking your LTV to 60%.

Working out your LTV is a straightforward calculation once you have three figures: your property's current value, your outstanding mortgage balance, and the amount you want to borrow with a secured loan.

1. Add your mortgage balance to the secured loan amount you're considering
2. Divide that total by your property's current value
3. Multiply the result by 100 to get a percentage

For example, a property worth £320,000 with a £160,000 mortgage and a £40,000 secured loan gives combined borrowing of £200,000. Divide £200,000 by £320,000 and multiply by 100, and you get an LTV of 62.5%.

An online calculator does this maths for you instantly, but understanding the formula helps you see exactly how changing the loan amount, or getting an updated valuation, would shift your result.

Your loan-to-value ratio is one of the biggest factors in a secured loan application, alongside your income and credit history. It affects three things in particular:

• How much you can borrow. Lenders set a maximum LTV they're prepared to go to, which puts a ceiling on the total amount you can borrow against your property
• Which lenders will consider you. Some specialist lenders only work up to a certain LTV, while others are prepared to go further for the right applicant
• How the lender views the risk. A lower LTV means more equity cushioning the loan, which lenders generally see as a lower-risk position

The Financial Conduct Authority requires lenders to carry out a full affordability assessment on top of the LTV calculation, so a strong LTV alone doesn't guarantee approval. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

There's no single maximum LTV that applies across the whole secured loan market. Each lender sets its own limit, and that limit usually depends on your credit history, income, and the type of property you own.

These figures are a general guide rather than a fixed rule. A small number of specialist lenders will go higher for strong applications, while others apply lower limits depending on the property type. An advisor can tell you where the current limits sit across the lenders they work with.

A secured loan is registered as a second charge against your property, sitting behind your existing mortgage, which is the first charge. If you were ever unable to keep up repayments and your home had to be sold, the first charge lender would be repaid before the second charge lender.

Because of this order of priority, lenders always calculate LTV on a combined basis, adding together every charge secured against the property rather than looking at the new loan in isolation. If you already have other borrowing secured against your home, such as a previous secured loan, this is included in the calculation too.

This is different from a further advance, where you borrow more from your existing mortgage lender. With a secured loan, you keep your current mortgage and deal, and simply take out a separate loan with a second lender secured against the same property.

If your calculator result shows a higher LTV than you'd like, there are a few practical steps that may help before you apply.

• Get an up-to-date, realistic valuation rather than relying on an old estimate or what you originally paid
• Consider borrowing a smaller amount if your plans allow for it, which reduces your combined LTV
• Pay down your existing mortgage balance where possible before applying
• Factor in home improvements that may have genuinely increased your property's value
• Check whether any other charges against the property could be cleared first

An advisor can look at your full circumstances and confirm which of these would make the most difference for you, rather than guessing based on the calculator alone.

If you're worried about your existing debts or unsure whether taking on more borrowing is the right step, MoneyHelper offers free, independent guidance. You can reach them at moneyhelper.org.uk or by calling 0800 138 7777.