Key Takeaways
- Loan-to-Value (LTV) compares the loan amount to the appraised value or purchase price of a home
- A lower LTV often qualifies you for better mortgage rates and terms
- LTV plays a big role in loan approval, PMI requirements, and refinance options
- You can calculate LTV using a simple formula: Loan ÷ Home Value × 100
- The Molly Dean Mortgage Team helps homebuyers understand and improve their LTV
What Is a Mortgage Loan-to-Value Ratio?
The loan-to-value (LTV) ratiois a percentage that measures the size of your mortgage against the value of the home you’re buying or refinancing. Lenders use this number to determine how much risk they’re taking by lending you money.
In plain terms, it answers this question: How much are you borrowing compared to what the home is worth?
Why Does LTV Matter in Mortgage Lending?
Lenders care about risk—and LTV is one of the clearest indicators. Here’s what a high or low LTV can mean for you:
- High LTV (above 80%)often means higher risk for the lender. You may need mortgage insurance or face stricter terms.
- Low LTV (80% or below)signals that you’ve got more equity, which may earn you better rates and more loan options.
Your LTV could affect your:
- Loan approval
- Interest rate
- Private Mortgage Insurance (PMI)
- Refinance eligibility
- Down payment requirements
How to Calculate Mortgage LTV: The Formula
To calculate your LTV, use this formula:
LTV = (Loan Amount ÷ Appraised Value or Purchase Price) × 100
Whichever is lower—appraised value or purchase price—is typically used.
Example
You’re buying a home for $300,000 and putting down $60,000.
Loan Amount = $240,000
LTV = ($240,000 ÷ $300,000) × 100 = 80%
What’s a Good Loan-to-Value Ratio?
Here’s a quick guide to LTV thresholds:
- 97% LTV– Possible with certain conventional or FHA loans
- 95% LTV– Common for first-time buyers
- 80% LTV– Often the sweet spot for avoiding PMI
- Below 80% LTV– Signals strong equity and low risk
The “right” LTV depends on your loan program. The Molly Dean Mortgage Team can walk you through which options best fit your financial goals.
LTV vs. CLTV: What’s the Difference?
CLTV stands for Combined Loan-to-Value, which includes alloutstanding mortgage balances—such as a home equity loan or second mortgage—divided by the property value.
Example:
- First mortgage: $200,000
- Home equity loan: $40,000
- Appraised value: $300,000
- CLTV = ($240,000 ÷ $300,000) × 100 = 80%
Knowing both LTV and CLTV gives lenders a full picture of your home equity and borrowing power.
How LTV Affects Mortgage Insurance (PMI)
Private mortgage insurance is often required if your LTV exceeds 80%. This protects the lender, not you, in case of default.
Here’s the tradeoff:
- PMI makes low-down-payment loans possible
- You can request to remove PMI once your LTV drops below 80%
The Molly Dean Mortgage Team helps clients structure loans strategically to reduce or eliminate PMI faster.
LTV Guidelines by Loan Type
Different loan programs have different LTV caps. Here’s how they stack up:
| Loan Type | Maximum LTV |
| Conventional | Up to 97% |
| FHA | Up to 96.5% |
| VA | Up to 100% |
| USDA | Up to 100% |
| Jumbo | Typically 80–90% |
| Refinance | 70–95%, depending on type and credit score |
The Molly Dean Mortgage Team offers all of the above—and we’ll help you find the right fit based on your current LTV.
How to Lower Your LTV Ratio Before Applying
Want better loan terms or to avoid PMI? Here’s how you can improve your LTV:
- Increase your down payment– Every extra dollar lowers your LTV
- Choose a less expensive home– Easier to reach 80% LTV or below
- Wait for home values to rise– A higher appraisal can tip the ratio
- Use cash gifts or grants– Some programs let you supplement your down payment with approved funds
Our team can help you estimate your LTV in advance and recommend steps to improve your chances of approval.
LTV in Refinancing: What You Need to Know
When refinancing, your LTV is recalculated based on your current mortgage balance and updated home value. Here’s why it matters:
- Lower LTV may unlock better refinance rates
- High LTV can limit cash-out refinanceoptions
- Some programs (like FHA Streamline) allow high LTV with no appraisal
Refinancing is one of the best ways to take advantage of strong home equity. We’ll help you decide when it’s the right move.
Work With the Molly Dean Mortgage Team to Make Your Numbers Work
Understanding your loan-to-value ratio is one of the most important steps in securing a smart mortgage. It helps you compare loan options, prepare for costs, and know what lenders expect.
Need help calculating your LTV or planning your next move? The Molly Dean Mortgage Team is here to guide you with personal service, custom loan strategies, and expert advice you can trust.
Ready to run the numbers?
Use our Mortgage Calculatoror Apply Nowto start your journey. We’ll take care of the rest.
Molly Dean
Molly Dean is consistently ranked as one of the top loan officers in the nation! Her knowledge of products and programs allows her the ability to help her borrowers find the program that best fits their individual needs.
Molly understands that when shopping for a mortgage professional, you need an individual and a team you can rely on. Molly’s goal is to help you in a fast and friendly manner.
Molly Dean and her team have a combined experience of 50+ years. Molly and her team work endlessly to make the purchase of a home as smooth as possible from start to finish. Molly and her team specialize in Conventional, FHA, VA, USDA, 203K, and Reverse loans.
