What is a good LTV ratio?

An LTV of 80% or lower is generally considered good. It usually unlocks better interest rates and lets you avoid private mortgage insurance (PMI).

How is LTV calculated?

Divide the loan amount by the appraised value of the property, then multiply by 100 to express it as a percentage. For example, a $240,000 loan on a $300,000 home is 80%.

Why does LTV matter to lenders?

A higher LTV means the borrower has less equity, so the loan is riskier for the lender. Higher-risk loans often come with higher rates or extra insurance requirements.

Should I use the purchase price or appraised value?

Lenders use the lower of the purchase price or the independent appraisal. Enter the appraised value here for the most accurate LTV.

Loan-to-Value (LTV) Calculator

What the Loan-to-Value (LTV) Calculator Does

This loan-to-value calculator measures how much of a property's value you are financing with a loan. You enter the loan amount and the property value (the purchase price or appraised value, whichever lenders use), and it returns your LTV ratio as a percentage.

It is useful for anyone applying for or refinancing a mortgage, home equity loan, or auto loan. Lenders rely on LTV to gauge risk: a lower ratio means more of your own money is invested, so it influences whether you are approved, the interest rate you are offered, and whether you must pay private mortgage insurance (PMI).

How the LTV Ratio Is Calculated

The formula is simple:

LTV = (Loan Amount / Property Value) x 100

The property value is normally the lower of the purchase price and the appraised value. Your down payment is the remaining share, so a 20% down payment produces an 80% LTV. For refinancing, the loan amount is the outstanding balance you want to refinance rather than a new purchase loan.

When you carry more than one loan against the same property, lenders also look at the combined loan-to-value (CLTV), which adds every loan secured by the home and divides by the value.

Worked Example With Real Numbers

Suppose you are buying a home priced at $300,000 and you have $45,000 for a down payment. You need to borrow the remaining $255,000.

LTV = ($255,000 / $300,000) x 100 = 85%

An 85% LTV is above the common 80% threshold, so the lender would likely require PMI until the balance is paid down. If you increased your down payment to $60,000, the loan would be $240,000 and the LTV would fall to exactly 80% ($240,000 / $300,000), typically avoiding PMI.

Why the 80% Threshold Matters

The 80% mark is a widely used cutoff for conventional mortgages. At or below it, you usually skip PMI; above it, lenders treat the loan as higher risk.

Key effects of a higher LTV include:

PMI: An LTV above 80% on a conventional loan generally triggers private mortgage insurance, an added monthly cost.
Interest rate: Higher LTV often means a higher rate, since the lender's exposure is greater.
Approval: Some loan programs cap LTV (for example, many lenders limit cash-out refinances to around 80%).
PMI removal: As you pay down the balance and the LTV drops, you can often request PMI cancellation near 80%, and it is typically removed automatically at 78%.

Tips and Common Mistakes

Use the correct property value. Lenders base LTV on the appraised value or purchase price, not on an optimistic estimate of what your home might be worth.

Watch these common errors:

Forgetting that a low appraisal raises your LTV, which can derail an approval or force a larger down payment.
Confusing LTV with CLTV when you have a second mortgage or HELOC; both loans count toward the combined figure.
Including closing costs in the loan amount only if they are actually financed, since rolling them in raises your LTV.
Assuming PMI is permanent; rising property values or extra principal payments can bring your LTV below 80%.

Factors That Affect Your LTV

Two things move your LTV: the loan amount and the property value. Increasing your down payment, paying down principal faster, or buying a home that appraises higher all lower the ratio. A falling market or a low appraisal pushes it higher.

Because LTV shapes your rate, insurance costs, and eligibility, it is worth modeling a few down payment scenarios with this calculator before you commit. Even a small change in the amount you put down can move you across the 80% line and meaningfully change your monthly payment.