The Loan-to-Value ratio, or LTV, is a cornerstone metric for anyone financing or refinancing a property. Lenders use LTV to gauge risk: a lower LTV typically means better interest rates and fewer fees, while a high LTV can trigger mortgage insurance or stricter approval criteria.
Whether you’re a first-time homebuyer, refinancing to tap equity, an investor evaluating cash-flow properties, or a real estate professional advising clients, knowing the LTV keeps you ahead when negotiating loan terms and managing risk.
At its core, LTV = (Loan Amount ÷ Property Value) × 100%. It compares your mortgage balance to the home’s current value—expressed as a percentage.
1. Determine the appraised value or purchase price (whichever is lower).
2. Identify your loan amount (total mortgage balance).
3. Divide loan amount by value and multiply by 100.
Purchase price: $250,000
Down payment: $50,000 → Loan amount: $200,000
LTV = ($200,000 ÷ $250,000) × 100% = 80%
Many lender and real estate websites offer free LTV calculators—just input your numbers to see instantly how your ratio stacks up.
Most conventional mortgages cap LTV at 80% for no mortgage insurance. With PMI, LTVs up to 95% are common but add monthly insurance premiums.
Investment property loans often max out around 75–80% LTV. HELOCs typically allow combined LTVs up to 85% of your home’s value.
Lenders see high-LTV loans as riskier and usually charge a higher interest rate to offset potential losses.
For conventional loans above 80% LTV, PMI is mandatory until your LTV falls below 78–80%, adding 0.3–1.5% of the loan amount annually.
LTV is a key factor in automated underwriting. Lower LTV can mean easier approvals, higher debt-to-income allowances, and better rate locks.
Every additional dollar you put down reduces your loan amount and directly lowers LTV.
Cosmetic and structural improvements—kitchen remodels, new roofing—can increase appraised value, reducing your LTV on refinance or sale.
Pairing a second mortgage or HELOC with your first can keep each loan under key LTV thresholds and avoid high PMI costs.
Under 80% is generally viewed as strong—fewer fees, better rates, no mortgage insurance.
Yes—through FHA, VA, USDA programs, or conventional loans with PMI, you can finance up to 95–100% of the purchase price.
LTV compares loan to value; CLTV adds second liens; LTC measures financing against total project cost in new builds or major renovations.
After improvements, a new appraisal can increase value, thus lowering your current LTV and potentially eliminating PMI.
Indirectly—higher LTV means less equity cushion, making default more likely if property values fall or homeowners face financial hardship.
Purchase price = $300,000;
Down payment = $30,000;
Loan = $270,000;
Calculated LTV = ($270,000 ÷ $300,000) × 100% = 90%
Jane sees that a small boost in down payment can save thousands over the loan term and streamline approval.
Track your LTV before purchase or refinance to optimize rate quotes, avoid surprise PMI, and strengthen negotiation leverage.
Explore lender websites for free LTV calculators, and visit our glossary page for more key mortgage terms.
