Complete Guide: LTV Calculator
Free LTV calculator instantly shows your loan-to-value ratio. See how your down payment affects your interest rate, PMI costs, and loan approval odds.
In the world of real estate finance, few numbers are as pivotal as your Loan-to-Value (LTV) ratio. Whether you're buying your first home in 2025 or refinancing an existing mortgage, this simple percentage acts as a gatekeeper for approvals, interest rates, and insurance costs. Think of LTV as a "skin in the game" metric—it tells lenders exactly how much of the property's value is covered by their loan versus your own equity. Our calculator helps you instantly visualize this balance, empowering you to make smarter decisions about down payments and loan programs.
What is Loan-to-Value (LTV)?
Loan-to-Value (LTV) is a risk assessment ratio used by lenders to determine the security of a mortgage. Mathematically, it's the mortgage amount divided by the appraised value of the property, expressed as a percentage.
Why do lenders care? Because if a borrower defaults, the lender needs to sell the home to recoup their money. A lower LTV means there is more "cushion" (equity) in the property, making it less likely the lender will take a loss even if property values dip. For you, a lower equity position is your golden ticket to the best financial terms available in today's market. Learn more about LTV at the CFPB website.
How to Calculate Your LTV Ratio
The formula is deceptively simple, yet it drives the entire mortgage industry. Here is exactly how it works:
The Golden Formula
A Real-World Example
Imagine you are eyeing a home listed for $400,000. You have saved $40,000 for a down payment.
- Property Value: $400,000
- Down Payment: $40,000. Calculate requirements with our Down Payment Calculator.
- Loan Amount: $360,000 ($400k - $40k)
- Calculation: $360,000 ÷ $400,000 = 0.90
- Result: Your LTV is 90%.
In this scenario, because your LTV is above 80%, you would almost certainly be required to pay Private Mortgage Insurance (PMI).
The "Magic Number": Why 80% LTV Matters
In mortgage lending, 80% LTV is the most critical threshold. Here is why hitting this target (meaning a 20% down payment) is so powerful:
- 1
No PMI: At 80% LTV or lower, you avoid Private Mortgage Insurance entirely. On a $300k loan, this saves you roughly $150-$250 every single month.
- 2
Lowest Interest Rates: Lenders reserve their absolute best "prime" rates for borrowers with at least 20% equity. A difference of just 0.25% in your rate can save you tens of thousands over 30 years.
- 3
Faster Equity Growth: Starting with 20% equity means you are never "underwater" on your loan unless the market crashes drastically, giving you more financial stability.
LTV Requirements by Loan Type (2025 Standards)
Not all loans require 20% down. Here is the maximum LTV allowed for common loan programs in 2025:
| Loan Type | Max LTV | Min Down Payment | Notes |
|---|---|---|---|
| Conventional | 97% | 3% | Strict credit requirements for >95% LTV. |
| FHA Loan | 96.5% | 3.5% | More lenient on credit scores (580+). |
| VA Loan | 100% | 0% | Exclusive to eligible veterans/military. |
| USDA Loan | 100% | 0% | For eligible rural/suburban properties. |
| Jumbo Loan | 80-90% | 10-20% | Varies by lender; stricter for high amounts. |
Strategic Ways to Lower Your LTV
If your calculated LTV is higher than you'd like, consider these strategies to improve your position before applying:
1. Boost Your Down Payment
This is the most direct method. Delaying your purchase by 6 months to save an extra 3-5% can sometimes drop you into a better LTV tier (e.g., from 95% to 90%), saving you money on PMI and interest rates.
2. Target Less Expensive Homes
Your down payment goes further on a cheaper property. A $20,000 down payment is only 5% on a $400k home (95% LTV), but it is nearly 7% on a $300k home, and 10% on a $200k home.
3. Use Gift Funds
Most loan types allow family members to "gift" you money for a down payment. This can instantly boost your equity position without requiring you to use your own cash reserves.
4. Fixer-Uppers (Renovation Loans)
Buying a home below market value due to condition issues can sometimes result in instant equity if the appraised value (after repairs) is significantly higher than your total cost.
LTV vs. CLTV: What is the Difference?
You might also hear the term CLTV (Combined Loan-to-Value). While LTV only looks at your primary mortgage, CLTV includes all loans secured by the property.
For example, if you have a first mortgage of $200k and a Home Equity Line of Credit (HELOC) of $50k on a $300k home, your LTV is 67% ($200k/$300k), but your CLTV is 83% ($250k/$300k). Lenders look at CLTV when approving second mortgages or home equity loans to ensure you aren't over-leveraged.
Expert Tip for 2025
If you currently have PMI because you bought with a low down payment, check your LTV regularly! Home values have fluctuated recently. If your home's value has risen enough to drop you below 80% LTV, you can request your lender to cancel PMI immediately, potentially saving you thousands without refinancing.
LTV for Investment Properties vs. Primary Residences
The rules for Loan-to-Value ratios change significantly when you move from buying a home for yourself to buying one for investment purposes. Lenders view rental properties as riskier assets—if you hit financial trouble, you are more likely to stop paying on a rental than on the roof over your head.
Consequently, LTV requirements are much stricter:
- Primary Residence: As discussed, you can often go as high as 97% or even 100% LTV.
- Second Home (Vacation Home): Typically capped at 90% LTV (10% down), though 80% is preferred for better rates.
- Investment Property (1 Unit): Generally capped at 80-85% LTV. Most lenders require at least 20-25% down to secure a conventional investment loan.
- Multi-Unit Investment (2-4 Units): Require even lower LTVs, often capping at 70-75%. Lenders want to see substantial equity to mitigate the risk of vacancies affecting your ability to repay.
LTV vs. DTI: The Dual Metrics of Approval
While LTV measures the collateral risk (is the home worth enough?), it is only half of the approval equation. The other half is your Debt-to-Income (DTI) ratio, which measures your ability to repay.
You can have a perfect 60% LTV (huge down payment), but if your income isn't high enough to support the monthly payments (high DTI), you will still be denied. Conversely, you can have a great income (low DTI), but if you have zero down payment (high LTV), you might struggle to find a loan outside of special programs like VA or USDA.
The Ideal Scenario: A borrower with an LTV under 80% and a DTI under 36% is considered a "slate-clean" borrower and will have banks competing to offer the lowest possible interest rates.
The Impact of Appraisal Gaps on Your LTV
In a competitive housing market, a common pitfall is the "appraisal gap." This happens when you agree to pay $500,000 for a home, but the bank's appraiser says it is only worth $480,000.
Crucially, lenders calculate LTV based on the LOWER of the purchase price or appraised value.
Scenario:
Purchase Price: $500,000
Appraised Value: $480,000
Planned Down Payment: $100,000 (20% of purchase price)
The Problem: The bank sees the value as $480,000. If you loan $400,000 ($500k - $100k), your LTV is calculated as $400,000 / $480,000 = 83.3%.
The Consequence: Suddenly, you are above 80% LTV and must pay PMI, despite putting $100k down. To fix this, you would need to increase your down payment to cover the gap effectively.
Cash-Out Refinancing and LTV Limits
If you already own a home and want to tap into your equity (cash-out refinance), LTV rules are strict. You cannot withdraw 100% of your equity. Check your potential savings with our Refinance Calculator.
Most lenders cap cash-out refinances at 80% LTV. This means you must leave at least 20% equity in your home untouched. FHA cash-out refinances closely mirror this with an 80% cap as well. VA loans are a notable exception, sometimes allowing cash-out up to 100% LTV, though finding lenders who participate in 100% cash-out VA loans can be challenging.