Enter the loan amount and the property's appraised value to see your LTV ratio.
Understanding the Loan-to-Value (LTV) Ratio
The Loan-to-Value (LTV) ratio is a crucial metric used by lenders to assess the risk associated with a mortgage or other secured loan. It directly compares the amount of money you're borrowing against the appraised value of the asset you're purchasing or refinancing. In simpler terms, it tells the lender how much of the asset's value is being financed by the loan.
A lower LTV ratio generally indicates lower risk for the lender, as there's more equity (owner's stake) in the property. Conversely, a higher LTV ratio means the borrower has less equity and the loan is closer to the full value of the asset, posing a greater risk to the lender.
This calculator takes your input for the loan amount and the property's appraised value, then applies this formula to provide your LTV percentage.
Why LTV Matters
Loan Approval: Lenders have maximum LTV thresholds. Exceeding these limits can lead to loan denial.
Interest Rates: Loans with lower LTV ratios (meaning less risk for the lender) often qualify for lower interest rates.
Private Mortgage Insurance (PMI): For conventional mortgages, if your LTV is above 80% (meaning you're putting down less than 20%), you'll likely be required to pay PMI. PMI protects the lender, not you.
Refinancing: Your LTV can affect your eligibility and terms when refinancing an existing mortgage.
Home Equity Loans and HELOCs: Lenders use LTV to determine how much you can borrow against your home's equity.
Interpreting Your LTV
LTV of 80% or less: Generally considered favorable. You typically won't need PMI for a conventional mortgage.
LTV between 80% and 90%: Still manageable, but may incur PMI and potentially higher interest rates.
LTV above 90%: Higher risk for the lender, often requiring PMI and potentially leading to less favorable loan terms or difficulty in securing the loan.
LTV over 100%: This indicates you owe more on the loan than the property is worth, which is known as being "underwater" or having negative equity.
Using an LTV calculator like this one can help you understand your borrowing position and make informed financial decisions.
function calculateLTV() {
var loanAmountInput = document.getElementById("loanAmount");
var propertyValueInput = document.getElementById("propertyValue");
var ltvResultDiv = document.getElementById("ltvResult");
var ltvDescriptionDiv = document.getElementById("ltvDescription");
var errorMessageDiv = document.getElementById("errorMessage");
// Clear previous error messages and results
errorMessageDiv.textContent = "";
ltvResultDiv.textContent = "–";
ltvDescriptionDiv.textContent = "Enter the loan amount and the property's appraised value to see your LTV ratio.";
var loanAmount = parseFloat(loanAmountInput.value);
var propertyValue = parseFloat(propertyValueInput.value);
// Validate inputs
if (isNaN(loanAmount) || isNaN(propertyValue)) {
errorMessageDiv.textContent = "Please enter valid numbers for both fields.";
return;
}
if (loanAmount <= 0 || propertyValue <= 0) {
errorMessageDiv.textContent = "Loan amount and property value must be positive.";
return;
}
// Calculate LTV
var ltv = (loanAmount / propertyValue) * 100;
// Format LTV to two decimal places
var formattedLTV = ltv.toFixed(2);
// Display result
ltvResultDiv.textContent = formattedLTV + "%";
// Provide a description based on LTV
var description = "";
if (ltv 80 && ltv 90 && ltv 100
description = "Your loan amount exceeds the property's appraised value. This means you have negative equity.";
}
ltvDescriptionDiv.textContent = description;
}