How to Calculate Loan-to-Value Ratio for Your Home or Property

What Loan-to-Value Means and Why It Matters

Loan-to-value (LTV) is the percentage of a property's worth that you are borrowing. If your home is worth $300,000 and you take out a $240,000 mortgage, your LTV is 80 percent. Lenders use this number to decide whether to lend to you, how much interest to charge, and whether you need mortgage insurance.

The higher your LTV, the riskier the loan looks to a lender—because if you stop paying and they have to sell the house, they might not recover their money. An LTV of 80 percent or lower is usually considered safer. An LTV above 80 percent often triggers private mortgage insurance (PMI), which protects the lender if you default, but costs you money each month.

You will see LTV come up when you refinance, explore for a home equity loan, or buy a property. Understanding how to calculate it yourself means you can shop for loans with confidence and spot when a lender's numbers do not match yours.

Key Takeaways

Loan-to-value is calculated by dividing the loan amount by the property value, then multiplying by 100 to get a percentage.
An LTV of 80 percent or lower usually avoids private mortgage insurance, which can add hundreds of dollars per year to your payment.
The property value used in the calculation is either the purchase price (for a new loan) or an appraisal or assessment (for refinancing or equity loans).
You can reduce your LTV by making a larger down payment, paying down the loan balance, or waiting for your home to increase in value.

The Basic LTV Formula

The calculation is straightforward: divide the loan amount by the property value, then multiply by 100.

LTV = (Loan Amount ÷ Property Value) × 100

For example: You are buying a house listed at $250,000. You plan to put down $50,000, so you need a mortgage of $200,000. Your LTV is ($200,000 ÷ $250,000) × 100 = 80 percent.

The property value is not always the purchase price. When you refinance or take out a home equity loan, the lender orders an appraisal to find the current market value. If your home has appreciated, your LTV will be lower than it was at purchase, even if you have not paid down the loan much.

What Property Value to Use in Your Calculation

For a purchase, the property value is the sale price (or the lower of the sale price and the appraised value, whichever the lender uses). The lender will order an appraisal to confirm the price is fair, but your initial LTV calculation uses the agreed purchase price.

For a refinance or home equity loan, the property value is the current appraised value, not what you paid for it years ago. If you bought your home for $200,000 ten years ago and it is now worth $350,000, the lender will use $350,000 in the LTV calculation, even though your original mortgage was based on $200,000.

Some lenders also use assessed value (the value your local tax assessor assigns for property tax purposes) as a starting point, but they will order a full appraisal before finalizing the loan. Do not assume the assessed value and the appraised value are the same—they often differ.

How Down Payment Size Affects Your LTV

A larger down payment lowers your LTV when ready. If you are buying a $300,000 home, a 10 percent down payment ($30,000) gives you an LTV of 90 percent. A 20 percent down payment ($60,000) gives you an LTV of 80 percent. A 30 percent down payment ($90,000) gives you an LTV of 70 percent.

The jump from 90 percent to 80 percent is significant because 80 percent is the threshold where many lenders stop requiring PMI. Putting down an extra $30,000 to cross that line can save you $100 to $300 per month in insurance costs over the life of the loan, depending on the loan size and your credit score.

If you cannot afford a 20 percent down payment now, you have options. Some first-time buyer programs allow LTVs as high as 96 or 97 percent. FHA loans (backed by the Federal Housing Administration) allow down payments as low as 3.5 percent, though they require mortgage insurance for the life of the loan. VA loans (for military members and veterans) often allow 100 percent LTV with no down payment and no PMI.

LTV When You Refinance or Take Out a Home Equity Loan

When you refinance, your LTV is recalculated based on the current appraised value of your home, not the original purchase price. If you bought your home for $250,000 with an 80 percent LTV ($200,000 loan), and it is now worth $350,000, your LTV on a new $200,000 loan would be only 57 percent—even though you have not paid down the principal much.

This is why refinancing can be a way to remove PMI. If your original loan had PMI because your LTV was above 80 percent, and your home has appreciated, refinancing into a new loan with an LTV below 80 percent will drop the insurance requirement.

For a home equity loan or line of credit (HELOC), lenders typically allow you to borrow up to 80 or 85 percent of your home's current value, minus what you still owe on the first mortgage. If your home is worth $400,000 and you owe $200,000 on the mortgage, you might borrow up to $120,000 on a HELOC (80 percent of $400,000 is $320,000, minus the $200,000 you owe). The combined LTV of both loans would be 80 percent.

When PMI Kicks In and How to Avoid It

Private mortgage insurance is required when your LTV exceeds 80 percent on a conventional loan. The cost varies but typically runs 0.5 to 1.5 percent of the loan amount per year, paid as part of your monthly mortgage payment. On a $200,000 loan, that could be $100 to $300 per month.

You can avoid PMI by putting down 20 percent or more, or by choosing a loan type that does not require it (such as VA or USDA loans). You can also remove PMI later if your LTV drops below 80 percent through a combination of paying down the loan and home appreciation. Some lenders will remove PMI automatically once you reach 78 percent LTV; others require you to request it.

If you are close to 80 percent LTV but not quite there, some lenders offer an 80/10/10 loan structure: an 80 percent first mortgage (no PMI), a 10 percent second mortgage, and a 10 percent down payment. This avoids PMI but means two loan payments instead of one, so compare the total cost before choosing this route.

How to Lower Your LTV Over Time

Your LTV decreases as you pay down the loan balance and as your home appreciates. If you started with an 85 percent LTV and make extra principal payments, your LTV will drop faster than with regular payments alone. If your home value rises due to market conditions or improvements you make, your LTV also drops without any extra effort on your part.

Making a single extra payment per year, or paying an extra $100 or $200 per month toward principal, can shorten your loan term by several years and lower your LTV much faster. Use an online mortgage calculator to see how extra payments affect your timeline to 80 percent LTV and PMI removal.

Home improvements that increase your property's value—a new roof, updated kitchen, or finished basement—can also lower your LTV if you later refinance or take out a home equity loan. The appraiser will factor in these improvements when determining the current value.

Frequently Asked Questions

Can I calculate LTV if I do not know my home's current value?

You can estimate it using online home value tools like Zillow or your county assessor's website, but these are rough estimates. For an official LTV calculation (to refinance or remove PMI), the lender will order a professional appraisal. If you are just trying to understand where you stand, an estimate is a good starting point.

What is the difference between LTV and combined LTV (CLTV)?

LTV is the ratio of a single loan to the property value. Combined LTV includes all loans against the property. If you have a first mortgage of $200,000 and a home equity loan of $50,000, and your home is worth $400,000, your first mortgage LTV is 50 percent, but your CLTV is 62.5 percent. Lenders use CLTV to decide how much you can borrow in total.

Does my credit score affect the LTV I need to get a loan?

No, LTV is purely a math calculation based on the loan amount and property value. However, your credit score affects the interest rate you are offered and whether the lender will accept a higher LTV. A borrower with a 750 credit score might get approved at 90 percent LTV, while a borrower with a 620 score might be limited to 80 percent.

What happens to my LTV if my home value drops?

Your LTV increases if your home loses value, even though you have not borrowed more money. If your home drops from $300,000 to $250,000 and you still owe $240,000, your LTV rises from 80 percent to 96 percent. This is called being underwater if the LTV exceeds 100 percent. You cannot remove PMI until your LTV drops back below 80 percent.

Can I use an estimated value instead of an appraisal to calculate LTV?

For your own planning, yes. For an official loan decision, no—the lender will order a professional appraisal. Appraisals cost $300 to $600 and take one to two weeks. If you are refinancing and the appraisal comes in lower than you expected, your LTV will be higher and you may not save as much money as you planned.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.