Which questions will I answer and why do they matter to your mortgage decisions?
Short answer: you need to know how a 5% LTV gap translates into real cash, monthly pain, and long-term interest costs. The rest is noise. This piece answers the exact questions mortgage shoppers and property investors ask when deciding whether to borrow 75% of a property's value or stop at 70%. I list the questions you should care about, then walk through numbers, common myths, the practical calculator steps, advanced trade-offs, and how market changes could affect your choice.
- What exactly is loan-to-value and why does a 5% difference matter? Is it true that higher LTV only means a slight rate bump? How do I calculate the actual cost difference between 75% and 70% LTV? When might choosing 75% LTV make practical sense despite the extra cost? How will lender pricing trends and regulation change LTV choices in 2026 and beyond? A quick checklist and self-assessment so you can decide today
What Exactly Is Loan-to-Value and Why Does a 5% Difference Matter?
LTV - loan-to-value - is simply the loan amount divided by the property value, expressed as a percentage. If a house is worth £500,000 and you propertyinvestortoday.co.uk borrow £350,000 your LTV is 70%. Borrow £375,000 and you are at 75% LTV. Simple math, but the consequences are not.
Why 5% matters: lenders price risk by LTV bands. Each band often carries a different interest rate and a different set of fees or product availability. That 5% can change your tariff, push you into a less attractive product set, increase your monthly payment noticeably, and reduce future refinance options. It also affects the amount of capital you have left over - either to invest or to keep as a buffer - and that opportunity cost is part of the real decision.
Is It True That Higher LTV Only Means a Slight Rate Bump?
No. That is the most persistent misconception. A small percentage jump in LTV can mean a small rate bump, a moderate rate bump, or a structural product penalty depending on the lender and market. Some lenders charge an extra 0.10% for the 75% band. Others will charge 0.30% to 0.60% or simply remove their best products from you.
And it is not just the rate. You may face:
- Higher arrangement fees Less favourable early repayment conditions Shorter fixed-rate options Additional requirements for documentation or higher service conditions
So expecting a trivial impact is risky. In mortgage maths small percentage differences compound over years.
How Do I Calculate the Actual Cost Difference Between 75% and 70% LTV?
Roll your sleeves up. You need three inputs: property value, loan term, and realistic lender rates for each LTV band. From there you can calculate monthly payment differences and total cost over the period you care about - typically the fixed-rate period or the entire term.
Step-by-step calculation
Set the property value. Example: £500,000. Compute loan amounts. 70% LTV = £350,000. 75% LTV = £375,000. Pick a loan term. Common is 25 years (300 months) or 20 years. Use your actual plan. Get realistic interest rates. Example conservative rates for illustration: 70% LTV = 3.00% fixed, 75% LTV = 3.35% fixed. Your lender may differ. Use the standard mortgage payment formula to get monthly payments, or plug numbers into an online calculator.Worked example - clear numbers
Item 70% LTV 75% LTV Property value £500,000 Loan amount £350,000 £375,000 Illustrative interest rate (annual fixed) 3.00% 3.35% Term 25 years (300 months) Monthly payment (approx) £1,660 £1,847 Monthly difference £187 Total extra paid over 5 years £11,200 (approx)Interpretation: in this example the 75% LTV option costs about £187 extra per month. Over five years that is roughly £11,200 in extra payments. You also borrowed an extra £25,000 so your outstanding balance will be higher at each point, which affects what you can remortgage against later.
Two clarifications:
- The numbers above include repayment of capital and interest calculated on a standard amortising mortgage. If your goal is short-term cash flow only, compare costs over your fixed-rate period (typically 2-5 years). If you're focused on lifetime cost, compare over the whole term.
Rule-of-thumb cost ranges
Practical ranges you will see in normal market conditions:
- A 5% LTV increase can add 0.10% to 0.60% to the rate depending on lender and market stress. Each 0.25% increase in rate on a £100,000 loan raises monthly payments by roughly £18-£22 depending on term. Scale that to your loan size.
When Might Choosing 75% LTV Make Practical Sense Despite the Extra Cost?
Sometimes the extra cost is worth it. Here are scenarios where taking 75% instead of 70% is sensible.
Scenario 1: You need liquidity to close a deal
If grabbing a property or completing a time-sensitive investment requires you to keep cash on hand, borrowing an extra 5% can be cheaper than delaying or selling assets. The lost interest may be less than the opportunity gained by closing that deal.
Scenario 2: Higher-return investment opportunity
If you can deploy the additional £25,000 into a use that reliably returns more than the extra mortgage cost (after tax), it can make sense. Be realistic with expected returns and factor in fees and taxes.
Scenario 3: Smoothing cash flow for renovations
Some improvements raise the property value. Borrowing at 75% to fund value-adding work that increases future equity or rental yield may be a rational move.
Scenario 4: Avoiding more expensive borrowing
If your alternative is an expensive bridging loan, or withdrawing savings with penalties, the slightly higher mortgage rate at 75% might be the lesser evil.
When not to choose 75% LTV
- If you can comfortably get to 70% without jeopardising the purchase or investment, stop at 70%. If the extra borrowing will leave you with no emergency buffer and that stress will affect decisions later. If the rate uplift would push you out of a future remortgage bracket you need for longer-term plans.
How Will Lender Pricing Trends and Regulation Change LTV Choices in 2026 and Beyond?
Short answer: expect tighter underwriting, more granular pricing, and less tolerance for one-size-fits-all products. Lenders continue to focus on capital adequacy and margin management. That means they will keep adjusting pricing by LTV band and by borrower profile.
Concrete points to watch:
- Pricing dispersion will remain - different lenders will be cheaper at different LTVs. Using a broker or doing rate shopping matters more than ever. Regulatory scrutiny around affordability and stress-testing persists. That can make higher LTV loans slightly harder to underwrite for marginal applicants. Product features may change - some lenders will compete on flexible repayment or fee structures rather than headline rate.
If rates rise broadly because of macro factors, the absolute cost gap between 70% and 75% LTV may widen. If rates fall, the gap could narrow, but your decision should be based on durable cash flows, not timing the market.
Example future-proofing checklist
- Run affordability with a 1% higher rate than the product quote to see if you still feel comfortable. Project remortgage options at years 3 and 5 - higher balance reduces your options. Keep an emergency fund equal to 3-6 months of mortgage payments above whatever you borrow.
Interactive Quiz - Which LTV Choice Suits You?
Answer quickly - mostly yes or no. Count your yes answers.
Do you need the extra cash now to complete a deal or investment? (Yes/No) Can you reasonably expect the extra £25k to generate returns above your extra mortgage cost? (Yes/No) Do you have 3-6 months of expenses in reserve after borrowing the extra amount? (Yes/No) Would the higher monthly payment be manageable even if rates ticked up 0.5%? (Yes/No) Are you comfortable with a higher outstanding balance when you remortgage in 3-5 years? (Yes/No)Scoring guide:
- 4-5 yes: 75% LTV can be justified if the maths checks out and you shop the market. 2-3 yes: consider whether the need for cash is urgent. Explore alternatives first. 0-1 yes: stick to 70% LTV or higher deposit if possible.
Quick Self-assessment Calculator Steps
Do this in a spreadsheet or on paper:
Column A: months 1 to 60 (for a 5-year view). Column B: monthly payment at 70% LTV using a payment function. Column C: monthly payment at 75% LTV. Column D: difference each month. Sum column D for total extra cash outflow over your chosen horizon. Compare that total to the benefit you expect from the extra cash - capital gain, investment profit, or avoided penalty.Final checklist - what to do now
- Get exact product quotes for both LTVs from at least three lenders or a good broker. Run the numbers over your fixed-rate period and over the full term. Factor fees - arrangement, valuation, legal, and any mortgage insurance if applicable. Consider alternatives: larger deposit, bridge financing, or re-structuring the purchase. Decide based on cash flow sensitivity and long-term refinance options, not headline rates.
Bottom line
If you want the simple takeaway: a 5% jump from 70% to 75% LTV is not trivial. Expect higher payments, potentially higher fees, and a meaningful total cost over the medium term. But it can be the right move in specific, well-planned situations. Do the arithmetic, stress-test your cash flow, and shop lenders. If you need, take the numbers in this article and run them against your figures. If you want, tell me the property value, desired term and two lender rates you have and I will run the same worked example for you.