Definition
Loan-to-value ratio (LTV)
Loan-to-value ratio (LTV) is the mortgage amount divided by the home's appraised value or purchase price, whichever is lower, expressed as a percentage. It measures how much of the property the lender is financing. LTV affects pricing, mortgage insurance, cash-out limits and which programs a borrower can use.
LTV is the mirror image of the down payment. If a buyer puts 10% down, the LTV is 90%. On a purchase, lenders generally use the lower of the contract price and the appraised value; on a refinance, they use the appraisal.
Worked example. A buyer offers $400,000 and puts $60,000 down, borrowing $340,000. LTV is $340,000 / $400,000 = 85%. If the appraisal comes in at $390,000, the lender recalculates against the lower figure and LTV rises to about 87.2%, which can change mortgage insurance pricing or require more cash.
On conventional loans, private mortgage insurance generally applies above 80% LTV. Pricing adjustments typically step up in bands as LTV rises. Refinances have their own ceilings, and cash-out caps are lower than rate-and-term caps. When there is a second lien, lenders look at combined loan-to-value (CLTV), which adds every loan secured by the property.
LTV changes over time as the balance falls and the value moves. A borrower who started at 95% may be under 80% a few years later through payments and appreciation, which opens options such as removing PMI or refinancing. The mortgage calculator shows LTV alongside the payment.
Calculators that use this term
FAQ · 2 questions
Questions about Loan-to-value ratio (LTV)
Is LTV based on the purchase price or the appraisal?
On a purchase, lenders generally use whichever is lower. If the appraisal comes in below the contract price, LTV is calculated on the appraisal, which may require more cash at closing.
What LTV do I need to avoid PMI?
On a conventional loan, borrowing 80% or less of the value generally avoids private mortgage insurance. Government programs such as FHA use their own mortgage insurance rules instead.
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