What Is LTV (Loan-to-Value Ratio)?
LTV (Loan-to-Value Ratio) is the percentage of your home's value that you're borrowing. It's calculated by dividing your loan amount by the home's appraised value. LTV is one of the most important numbers lenders use to assess risk and determine your loan terms.
Key Facts
- LTV = Loan Amount ÷ Home Value × 100.
- 80% LTV (20% down) is the magic number to avoid PMI on conventional loans.
- Higher LTV means higher risk for the lender — and potentially higher rates or fees for you.
- As you pay down your loan and your home appreciates, your LTV improves.
- FHA loans allow up to 96.5% LTV; VA and USDA allow up to 100%.
Real-World Example
Home value: $650,000. Loan: $585,000. LTV = $585,000 ÷ $650,000 = 90%. Since that's above 80%, you'd pay PMI on a conventional loan. Once your balance drops to $520,000 (80% LTV), you can request PMI removal.
Why It Matters
Your LTV affects whether you need mortgage insurance, what interest rate you qualify for, and your loan options. Improving your LTV — through a larger down payment or home appreciation — puts you in a stronger financial position.
En Español
El LTV (Relación Préstamo-Valor) es el porcentaje del valor de tu casa que estás pidiendo prestado. Se calcula dividiendo el monto de tu préstamo entre el valor tasado de la casa. El LTV es uno de los números más importantes que los prestamistas usan para evaluar riesgo y determinar los términos de tu préstamo.