Loan-to-value (LTV)

What is LTV?

A loan-to-value (LTV) ratio is a financial term used by lenders to describe the ratio between the value of your home loan and the home’s value and represent the first mortgage line as a percentage of the total appraised value of your home.

Calculating your LTV

To calculate your LTV, divide your loan amount by the home’s appraised value or purchase price. (Either the price you paid for your home or the appraised value at closing, whichever is less.)

  • Why your LTV Ratio is important

    Why your LTV Ratio is important


    Lenders will evaluate your loan-to-value ratio while they are underwriting your loan. In general, borrowers with lower LTV ratios will qualify for lower mortgage rates than borrowers with higher loan-to-value ratios. Borrowers who have a lower loan-to-value ratio are considered less risky to lenders because they have more equity in their homes. In the eyes of a lender, borrowers with a lower loan-to-value ratio, and thus more equity in their homes, are less likely to default on their mortgage, and even if they did default, the lender would have a better chance of selling the home in foreclosure for at least as much as they are owed for the mortgage.

  • Your LTV Ratio and Private Mortgage Insurance (PMI)

    Your LTV Ratio and Private Mortgage Insurance (PMI)


    Your loan-to-value ratio will also determine whether you must pay Private Mortgage Insurance.


    For conventional loans, borrowers who want to avoid paying private mortgage insurance will need to make a down payment of 20 percent of the value of the home.


    FHA purchase loans will allow you to have a loan-to-value ratio of up to 96.5 percent. USDA, VA, and other specialty loan types may allow for a 100 percent LTV for a purchase loan.

  • Refinance Options for Borrowers with a Loan to Value Ratio Over 100%

    Refinance Options for Borrowers with a Loan to Value Ratio Over 100%


    Borrowers with an extremely high loan-to-value ratio are considered “upside-down” on their mortgage, i.e., the value of their house is less than their loan amount. Although this is not ideal, you may still be able to refinance. Special refinancing programs exist for borrowers with a loan-to-value ratio over 100 percent. The most common high loan-to-value refinance program is the HARP Refinance program. If you have a FHA loan and have a high loan-to-value ratio, you may be eligible for a FHA streamline loan.