LTV (Loan-to-Value) Ratio Calculator
Determine your mortgage risk profile and PMI requirements.
What is the Loan-to-Value (LTV) Ratio?
The Loan-to-Value (LTV) ratio is a critical financial metric used by lenders to assess the risk of a mortgage. It compares the amount of the loan you are requesting against the total appraised value of the property you wish to purchase.
LTV Ratio = (Loan Amount / Appraised Property Value) × 100
Why the 80% Threshold Matters
In the mortgage industry, 80% is a magic number. If your LTV ratio is higher than 80%, most lenders will require you to pay Private Mortgage Insurance (PMI). This insurance protects the lender—not you—in case you default on the loan. Once your LTV drops to 78%-80% through monthly payments or home appreciation, you can typically request to cancel PMI.
LTV Ratio Examples
- Low Risk (60% LTV): You buy a $500,000 home with a $200,000 down payment. Your loan is $300,000. LTV = 60%. Lenders offer the best rates here.
- Standard (80% LTV): You buy a $300,000 home with a $60,000 down payment. Your loan is $240,000. LTV = 80%. No PMI required.
- High LTV (95% LTV): You buy a $200,000 home with a $10,000 down payment. Your loan is $190,000. LTV = 95%. Expect higher interest rates and monthly PMI.
How to Improve Your LTV Ratio
If your LTV is too high to qualify for a specific loan or a better interest rate, you have two primary options: increase your down payment or find a lower-priced property. For current homeowners, the LTV improves as you pay down your principal balance or as the market value of your home increases.