Mortgages and Property

What Is Loan-to-Value (LTV) in Canada?

The ratio of your mortgage to your home's value, expressed as a percentage. Determines CMHC insurance eligibility and mortgage rate tiers in Canada.

Definition

Loan-to-Value (LTV) is the ratio of the mortgage amount to the property's purchase price or appraised value, expressed as a percentage. In Canada, LTV is a key determinant of whether CMHC mortgage default insurance is required: any mortgage with an LTV above 80% (down payment under 20%) requires CMHC or equivalent insurance. LTV also influences your mortgage rate, with lower LTVs generally accessing better pricing. A mortgage with LTV above 95% is not eligible for CMHC insurance (minimum 5% down payment is required by law). Homes priced at $1 million or more require a minimum 20% down payment regardless, capping insured LTV at 80%.

Formula

LTV = (Mortgage amount / Property value) x 100

Example

You purchase a $600,000 home with a $90,000 down payment (15%). Mortgage = $510,000. LTV = $510,000 / $600,000 x 100 = 85%. CMHC insurance is required at this LTV. Premium rate = 2.80% of the loan.

Use It

Try the CMHC Insurance Calculator

Related Terms

CMHC Mortgage Default InsuranceMandatory insurance required when your down payment is less than 20%, protecting the lender if you default. Provided by CMHC, Sagen, or Canada Guaranty.Mortgage Stress TestThe federal rule requiring lenders to qualify borrowers at the greater of their contract rate plus 2% or the 5.25% benchmark, ensuring borrowers can handle rate increases.Mortgage Amortization in CanadaThe total period over which a mortgage is repaid. In Canada, CMHC-insured mortgages are limited to 25 years; uninsured first-time buyer mortgages may extend to 30 years.

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