What Is LTV (Loan-to-Value Ratio)?
The loan amount divided by the property's appraised value, expressed as a percentage.
Definition
LTV is one of the most important numbers in mortgage lending. It tells the lender how much skin you have in the game. Lower LTV means more equity, less risk to the lender, and usually a better rate. LTV above 80% typically requires private mortgage insurance (PMI). Above 95-97%, options narrow to FHA, VA, or USDA programs. Lenders use LTV at origination and recompute it for refinances based on the current appraised value.
Formula
LTV = Loan Amount / Appraised Value × 100
Example
A $400,000 home with a $320,000 mortgage has an 80% LTV. Putting $80,000 down (20%) avoids PMI on a conventional loan.
Use It
Try the Home Affordability CalculatorRelated Terms
PMI (Private Mortgage Insurance)Insurance lenders require on conventional loans when your down payment is below 20%.Down PaymentThe cash you pay upfront when buying a home, separate from the mortgage loan amount.DTI (Debt-to-Income Ratio)Your total monthly debt payments divided by gross monthly income, used by lenders to qualify you.