What Is Loan-to-Value?
Loan-to-value (LTV) is your loan balance expressed as a percentage of what the property is worth. It is the single number lenders use to price risk: the more of the home's value you've borrowed, the less cushion exists if prices fall and the more the lender stands to lose. LTV decides whether you pay PMI, what refinance programs you qualify for, how much equity you can tap, and often your rate itself.
The LTV and CLTV Formulas
CLTV = (All loan balances) ÷ Home value × 100
Equity = Home value − All loan balances
LTV by itself covers just the first mortgage. Add a second mortgage or HELOC and lenders switch to CLTV(combined loan-to-value) — every loan stacked on the house, divided by its value. A 55% LTV with a big HELOC on top can still be an 85% CLTV, and it's the CLTV that equity-loan limits and cash-out refinance rules are written against.
Worked Examples
- $400,000 home, $220,000 mortgage: LTV = 220,000 ÷ 400,000 = 55%. Equity $180,000. At an 85% CLTV cap you can still borrow 400,000 × 0.85 − 220,000 = $120,000 against the house.
- Buying a $300,000 home with $45,000 down: the loan is $255,000, so LTV = 255,000 ÷ 300,000 = 85% — above 80%, expect PMI on a conventional loan.
- Same home, $75,000 down: loan $225,000, LTV = 75% — no PMI, and better pricing at almost every lender tier.
- Same $300,000 home years later:balance paid down to $240,000 but the house is now worth $300,000 → LTV 80%. Extra principal payments lower LTV from the loan side; appreciation moves it from the value side. Both count.
The Thresholds That Matter
| LTV | What it unlocks |
|---|---|
| ≤ 80% | No PMI on conventional loans; best refinance pricing; standard equity-loan territory |
| ≤ 78% | Servicer must auto-cancel PMI (on request at 80%) |
| ≤ 85% | Common CLTV cap for home equity loans / HELOCs (some go 90%+) |
| ≤ 97% | Maximum LTV for standard conventional purchase loans (with PMI) |
| ≤ 96.5% | FHA purchase maximum (with mortgage insurance premium) |
Watching LTV fall is also how paying down a mortgage quietly builds options: each drop past a threshold removes a fee or opens a program. The amortization schedule calculator shows the balance side year by year; combine it with a realistic home value here to track your trajectory.
FAQs
What is a good loan-to-value ratio?
80% or lower. Below 80% LTV, conventional loans require no PMI and lenders offer their best pricing. Every 5% drop in LTV typically improves rate and fee offers. For home equity borrowing, lenders look at combined LTV (CLTV) and usually allow you to borrow up to 80–85% of the home's value across all loans.
How do I calculate LTV?
Divide the loan balance by the property's value and multiply by 100. A $220,000 mortgage on a $400,000 home is 220,000 ÷ 400,000 = 55% LTV. For a purchase, use the price as the value and the loan amount after your down payment: $45,000 down on a $300,000 home means a $255,000 loan and an 85% LTV.
What is the difference between LTV and CLTV?
LTV counts only the first mortgage against the home's value. CLTV (combined loan-to-value) adds every loan secured by the home — second mortgages, HELOCs, home equity loans — and divides the total by the value. Equity lenders and cash-out refinance rules are written against CLTV. A 55% LTV home with a large HELOC can still be at 85% CLTV.
At what LTV can I get rid of PMI?
On conventional loans you can request PMI cancellation once your LTV reaches 80% of the home's original appraised value, and the servicer must cancel it automatically at 78% — as long as you're current on payments. Extra principal payments get you there faster; the amortization schedule calculator shows when your balance crosses each threshold. FHA loans carry mortgage insurance for most of the loan's life regardless of LTV.
How much can I borrow against my home equity?
Most lenders cap total borrowing at 80–85% of the home's value (CLTV). Subtract your current mortgage balance from home value × 0.85: on a $400,000 home with a $220,000 mortgage, that's $400,000 × 0.85 − $220,000 = $120,000 available at the 85% cap, or $100,000 at 80%. Credit score, income, and debt-to-income can reduce the actual offer.
Estimates for informational purposes. Lenders use their own appraisal value and program rules, which override these calculations.