Enter Values
Key Definitions
Property Value:
Appraised or current market value. For purchases, lenders often use the lower of purchase price or appraised value.
Mortgage Debt:
For existing properties, this is your current loan balance. For new purchases, use the proposed loan amount.
Calculation Result
LTV Ratio
70.00%
Loan Amount / Property Value
Equity Amount
$360,000
Equity Percentage
30.00%
Formula Breakdown
LTV = Loan Amount / Property Value x 100
Equity = Property Value - Loan Amount
LTV Thresholds by Loan Type
| Loan Type | Typical Max LTV | Notes |
|---|---|---|
| Conventional (with PMI) | 80-97% | Principal residence only; PMI above 80% |
| Conventional (no PMI) | Up to 80% | Standard 20% down payment threshold |
| FHA | Up to 96.5% | Principal residence; 580+ credit score |
| VA | 0% down possible | Eligible veterans with entitlement |
| Investment Property | Varies | Typically 70-80% for 1-4 unit |
| Commercial | Varies | Illustrative range 65-80% |
These are general guidelines only. LTV requirements vary significantly by lender, loan program, borrower creditworthiness, property type, and market conditions. Always verify current requirements with your lender.
Understanding Loan-to-Value (LTV)
What is Loan-to-Value (LTV)?
The Loan-to-Value (LTV) ratio is a financial metric that compares the loan amount to the property's appraised value. It's expressed as a percentage and is one of the most important factors lenders use to assess mortgage risk.
LTV Formula
LTV = Loan Amount / Property Value x 100
Equity = Property Value - Loan Amount
Equity % = 100 - LTV
Equity = Property Value - Loan Amount
Equity % = 100 - LTV
Why LTV Matters
LTV is critical because it affects:
- Loan Approval: Higher LTV means more risk for lenders, which may affect approval
- Interest Rates: Lower LTV typically qualifies for better rates
- PMI Requirements: Conventional loans above 80% LTV usually require Private Mortgage Insurance
- Down Payment: LTV determines your minimum required down payment
The 80% LTV Threshold
The 80% LTV threshold is significant for conventional mortgages:
- Below 80% LTV: No Private Mortgage Insurance (PMI) required on conventional loans
- Above 80% LTV: PMI typically required on conventional loans until you reach 80% LTV
- PMI Cancellation: For conventional loans, you can request PMI removal at 80% of the original property value. PMI is automatically terminated at 78% of original value. Removal based on appreciation requires a new appraisal and lender approval.
Note: PMI protects the lender, not you. It allows you to buy with less than 20% down, but adds to your monthly payment. FHA mortgage insurance (MIP) and VA loans follow different rules - FHA MIP may last the life of the loan for loans with LTV above 90% at origination.
LTV vs. CLTV
- LTV: Considers only the primary mortgage
- CLTV (Combined LTV): Includes all liens - primary mortgage plus any second mortgages, HELOCs, etc.
If you have multiple loans on a property, lenders evaluate both ratios. This calculator computes the primary LTV only.
How to Lower Your LTV
- Larger down payment: More equity at purchase lowers LTV
- Principal payments: Paying down your mortgage balance reduces LTV
- Property appreciation: As value increases, LTV decreases
- Property improvements: Strategic improvements can increase appraised value
Tip: A lower LTV can help you qualify for refinancing at better rates, remove PMI (on conventional loans), or access home equity through a HELOC.
Frequently Asked Questions
Loan-to-Value (LTV) ratio is a financial metric that compares the loan amount to the appraised value of a property. It is calculated as: LTV = Loan Amount / Property Value x 100. Lenders use LTV to assess risk - higher LTV means more risk for the lender because there's less equity cushion if property values decline.
For conventional mortgages on a primary residence, 80% LTV or lower is typically ideal as it avoids Private Mortgage Insurance (PMI). However, acceptable LTV varies by loan type: FHA loans allow up to 96.5% LTV, VA loans can allow 100% financing for eligible veterans with sufficient entitlement and lender approval, and investment properties typically require 70-80% LTV or lower. Lower LTV generally means better interest rates and loan terms.
Higher LTV ratios generally result in higher interest rates because lenders view them as higher risk. Lower LTV (more equity) typically qualifies borrowers for better rates. The exact impact varies by lender, loan type, credit score, and market conditions. Even small rate differences compound significantly over a 30-year loan term.
Private Mortgage Insurance (PMI) is insurance that protects the lender if you default on a conventional loan. It is typically required when LTV exceeds 80% (less than 20% down payment). Under the Homeowners Protection Act, you can request PMI cancellation at 80% of the original property value, and PMI is automatically terminated at 78% of original value. Removal based on appreciation requires a new appraisal and lender approval. Note: FHA mortgage insurance (MIP) follows different rules and may not be cancelable at the same thresholds.
LTV (Loan-to-Value) considers only the primary mortgage. CLTV (Combined Loan-to-Value) includes all liens on the property, such as second mortgages, HELOCs, or other loans secured by the property. Lenders evaluate both ratios when you have multiple loans. For example, if you have an 80% first mortgage and a 10% HELOC, your LTV is 80% but your CLTV is 90%.
You can lower your LTV by: (1) making a larger down payment, (2) paying down your mortgage principal faster through extra payments, (3) waiting for property appreciation, or (4) making strategic improvements that increase property value. Lower LTV can help you qualify for better loan terms, remove PMI (on conventional loans), or access home equity.
Disclaimer
This calculator is for educational purposes only. LTV requirements vary by lender, loan program, property type, and borrower qualifications. Actual loan terms depend on underwriting criteria, credit profile, and current market conditions. Consult a qualified mortgage professional for financing decisions.
