LTV Rate Calculator
Calculate your Loan-to-Value ratio instantly.
Calculated LTV Ratio
0.00%
Equity Amount: $0.00
What is Loan-to-Value (LTV) Ratio?
The Loan-to-Value (LTV) ratio is a critical assessment metric used by lenders to express the ratio of a loan to the value of the asset purchased. In real estate, it represents the percentage of the property's value that is mortgaged.
Essentially, it measures the lending risk. A higher LTV ratio suggests higher risk for the lender because the borrower has less equity in the property. If foreclosure becomes necessary, the lender is more likely to incur a loss if the LTV is high.
The Formula:
LTV Ratio = (Mortgage Amount ÷ Appraised Property Value) × 100
LTV Ratio = (Mortgage Amount ÷ Appraised Property Value) × 100
Why is Your LTV Rate Important?
Your LTV rate directly influences the terms of your loan and your monthly costs. Here is how different LTV thresholds impact you:
- 80% or Lower: This is the "Gold Standard" for conventional loans. If your LTV is at or below 80%, you typically do not have to pay for Private Mortgage Insurance (PMI). You are also likely to secure lower interest rates.
- 80.01% to 95%: You will likely be required to pay PMI until your equity reaches 20%. Lenders view this as a moderate risk.
- Above 95%: Loans with an LTV this high (like FHA loans) almost always require mortgage insurance for the life of the loan or a significant period, and lending criteria are stricter.
Understanding Equity vs. LTV
Equity is the flip side of LTV. While LTV measures what you owe compared to the value, equity measures what you own.
For example, if your home is worth $400,000 and your loan is $300,000:
- LTV: ($300,000 / $400,000) = 75%
- Equity: $400,000 – $300,000 = $100,000 (25%)
As you pay down your principal balance or as your property value increases, your LTV decreases and your equity increases.
When to Recalculate Your LTV
You should use this LTV rate calculator when considering:
- Refinancing: To see if you qualify for better rates or cash-out options.
- Removing PMI: If you believe your home's value has increased enough to drop your LTV below 80%.
- Home Equity Loans: Lenders often cap the Combined LTV (CLTV) at 80-90% when issuing second mortgages.