The short answer
Loan-to-value ratio, or LTV, is how much you owe on your home divided by what it's worth. A $320,000 loan on a $400,000 home is an 80% LTV. It's the flip side of equity: 80% LTV means 20% equity. Lenders use LTV to decide whether you need mortgage insurance, what rate you get, and whether you can refinance, which is why a few specific LTV numbers, especially 80% and 78%, matter so much.
How to calculate LTV
LTV = loan balance ÷ home value × 100
| Loan balance | Home value | LTV | Equity |
|---|---|---|---|
| $360,000 | $400,000 | 90% | 10% |
| $320,000 | $400,000 | 80% | 20% |
| $337,000 | $450,000 | 75% | 25% |
| $200,000 | $400,000 | 50% | 50% |
LTV and equity always add up to 100%. Lenders talk in LTV. Homeowners usually think in equity. They're the same idea, seen from opposite sides. See what is home equity and how is it calculated.
Want to know your LTV today? A free payoff projection includes it.
Which value lenders use
When you buy, lenders use the lower of the purchase price or the appraised value. Pay $410,000 for a home that appraises at $400,000, and your LTV is based on $400,000.
Later on, it depends on what you're doing. Automatic PMI removal uses your home's original value. Refinancing, or asking to remove PMI based on today's value, uses a new appraisal.
The 5 LTV numbers lenders watch
| LTV | What usually happens |
|---|---|
| Up to 97% | Common maximum for conventional loans with very small down payments |
| 96.5% | Common maximum for FHA loans, with 3.5% down |
| 80% | No PMI needed on a new conventional loan; you can request PMI removal on an existing one |
| 78% | PMI ends automatically on schedule, based on original value |
| 75% | Common threshold to remove PMI based on a new appraisal, 2 to 5 years into the loan |
The 80% line is the big one. Cross it and mortgage insurance usually goes away, and loan pricing often improves. See when PMI comes off automatically.
Why lenders care so much
LTV is a measure of risk. If a borrower stops paying, the lender may have to sell the home. The lower the LTV, the more likely the sale covers the loan. That's why higher LTVs come with mortgage insurance and sometimes higher rates.
Combined loan-to-value
If you have more than one loan on your home, such as a first and second mortgage, lenders look at combined loan-to-value, or CLTV. Add up every balance secured by the home and divide by its value.
A $300,000 first mortgage and a $40,000 second mortgage on a $400,000 home is an 85% CLTV, even though the first mortgage alone is 75%.
How to lower your LTV
Two ways: owe less, or own something worth more.
Pay down principal. Extra payments lower your balance directly. See how to build home equity faster.
Rising value. If your home appreciates, your LTV falls without any extra payments. To use that for PMI or refinancing, you'll typically need an appraisal.
Paying off high-interest debt first can free up more money for principal. The Zero Debt Method is built for that.
How long until 80%?
With 10% down on a 30-year loan at 6.5%, regular payments reach 80% LTV, based on the original value, in about 7 years and 11 months. See how long it takes to reach 20% equity for other down payments and rates, and the full picture in home equity explained.
The lowest LTV of all
Zero percent is the LTV of a paid-off home. Ridgewell's Mortgage Accelerator Program is designed to change how your mortgage is structured so qualifying households can get there in as little as 5 to 7 years.
Payoff timelines are illustrations for qualifying households and are not guaranteed.
Where to start
Divide your current balance by a realistic estimate of your home's value. If you're near 80%, call your servicer about PMI. If you're well above it, extra principal payments are the most direct way to bring it down.
To see your LTV and how fast it could fall, get a free payoff projection from a licensed agent.
Examples are hypothetical and rounded. LTV limits vary by lender, loan type, and program.
