What Is Loan-to-Value Ratio?
The Loan-to-Value (LTV) ratio is a financial metric that compares the size of a mortgage loan to the appraised value of the property. Lenders use LTV to assess risk -- higher LTV means more risk because the borrower has less equity in the property.
LTV is critical when applying for a mortgage, refinancing, or taking out a home equity loan. Most conventional loans require an LTV of 80% or less to avoid Private Mortgage Insurance (PMI).
LTV Formula
LTV Thresholds
| LTV Range | Impact | Notes |
|---|---|---|
| 0% - 80% | No PMI required | Best rates, most options |
| 80% - 90% | PMI required | Standard conventional loans |
| 90% - 95% | Higher PMI | Limited lender options |
| 95% - 97% | Maximum conventional | First-time buyer programs |
| 96.5% | FHA minimum | 3.5% down payment |
Frequently Asked Questions
What LTV do I need to remove PMI?
For conventional loans, PMI can be removed when your LTV reaches 80% (20% equity). You can request removal at 80%, and lenders must automatically cancel PMI at 78% LTV based on the original purchase price.
What is the difference between LTV and CLTV?
LTV considers only the primary mortgage. CLTV (Combined Loan-to-Value) includes all loans secured by the property, such as a second mortgage, HELOC, or home equity loan. Lenders use CLTV to assess total risk exposure.
Can I have an LTV over 100%?
Yes, this means you are "underwater" -- you owe more than the home is worth. This can happen when property values decline. VA loans and some FHA programs can exceed 100% LTV in certain circumstances.