Martin Lewis has shared advice for first time buyers - and anyone re-mortgaging - about the importance of Loan to Value ratio (LTV).

This is the percentage of the property value you're buying with a mortgage – so the proportion you're borrowing.

To calculate your LTV, take off your deposit and any equity as a percentage of the property value from 100%. So if you've a £60,000 deposit on a £300,000 home, that's a 20% deposit. This means you owe 80% – so the LTV is 80%.

Then if you're remortgaging, and you own 40% of the value of your home, you'll need a remortgage deal for the remaining 60% – this is your LTV.

Mortgage and remortgage rates are priced in the LTV bands – and the bigger deposit/equity you have, the lower the interest rate will be.

Typically mortgages get much cheaper at 10 per cent intervals - so 90%, 80%, 75% and 60% LTV, with 60 giving the best offers.

As an example, for a two-year fixed fee saver first time buyer HSBC mortgage today, the percentage for a 95% LTV ratio is 5.59%, whereas at 60% LTV it's 4.58%. 

If both mortgages owed £130,000 and were taken over 25 years, that would be £729 a month for the 60% rate compared to £806 for the 95% deal.

 

Remember: Your home's value can change

The value is usually based on your surveyor's report when you are buying your property.

Over time, you may find that your LTV goes up by more than just the value of your payments. This is particularly the case for fixer-uppers or homes in areas that see rapid rises (or falls) in house prices. Or it could be because you've made overpayments during your mortgage term.

This is only usually applied at the point of remortaging - so when your deal is up or you decide to change mortgage products or move banks. If you believe your house has gone up in value, it's worth telling the bank this, and they may send out an assessor to check and revalue.