Loan-to-Value (LTV)

Turning Loan Balance and Property Value Into a Risk Ratio

Loan-to-value (LTV) is a loan balance expressed as a percentage of the property’s value — the single ratio lenders check most when deciding mortgage insurance requirements, refinance eligibility, and how much more can be borrowed against a property. Enter your property value and current loan balance to see your LTV, your equity position, and how that LTV compares to the common thresholds lenders actually use.

This is distinct from the Home Equity / HELOC Calculator calculator, which takes a maximum LTV as a given input to answer “how much could I still borrow” — this calculator instead computes your CURRENT LTV directly, the figure a lender actually checks.

The Formula

$$\vC{\text{Loan-to-Value}} = \frac{\vB{\text{Loan Balance}}}{\vA{\text{Property Value}}} \times 100$$ $$\text{Equity} = \vA{\text{Property Value}} - \vB{\text{Loan Balance}}$$

Worked Example

A property worth $400,000 with a $320,000 loan balance:

1. Loan-to-value: $\vC{320,000 \div 400,000 \times 100} = 80\%$.
2. Equity: $400,000 - 320,000 = \$80,000$, or 20% of the property’s value.
3. At exactly 80% LTV, a conventional loan typically still requires PMI, though federal law lets you request cancellation once you cross below that threshold.

Key Factors to Consider

• LTV changes over time from two directions at once: paying down the loan and the property’s value changing. Regular principal payments naturally lower LTV over time, but a rising or falling local market can move it just as much (or more) in either direction — a property that appreciates can cross below a PMI threshold faster than the amortization schedule alone would suggest, while a declining market can push LTV higher even as the loan balance shrinks.
• A lower LTV generally unlocks meaningfully better loan terms, not just PMI removal. Lenders commonly offer better interest rates at lower LTV tiers (e.g. 80% vs. 90% vs. 95%) on new loans and refinances, since a bigger equity cushion means less lender risk if the borrower defaults — LTV is worth checking before shopping for a new loan, not just when tracking PMI.
• Federal law gives borrowers a right to request PMI cancellation, separate from a lender’s own automatic cancellation rules. The Homeowners Protection Act lets a borrower request cancellation once LTV reaches 80% (based on original value, with conditions), even if the lender’s own automatic cancellation doesn’t trigger until 78% — knowing this distinction can save months of unnecessary PMI payments for someone who tracks their own LTV.
• Home improvements that genuinely increase appraised value can lower LTV without any extra loan payments. Since LTV depends on current property value, a renovation that meaningfully raises a home’s appraised value directly improves LTV — though only a professional appraisal, not a homeowner’s own estimate, is what a lender will actually rely on.

Common Mistakes

• Comparing LTV against the original purchase price instead of current value. LTV should always use the property’s CURRENT appraised or market value, not what was originally paid — the two can diverge significantly after appreciation or a market downturn.
• Forgetting to add up every loan when more than one exists. If there’s a HELOC or second mortgage on top of a first mortgage, the combined loan-to-value ratio (CLTV) that lenders check adds up every balance first — entering just one loan’s balance understates the real ratio.
• Assuming 80% is a hard cutoff rather than a common guideline. Exact PMI and refinance rules vary by lender and loan program — 80%/78%/97% are widely-cited industry conventions, not a universal rule every lender follows exactly.

Useful to Know

• Want to know how much more you could borrow instead of your current ratio? Home Equity / HELOC Calculator starts from a maximum LTV to answer that question.
• Trying to estimate what your PMI payment actually costs at your current LTV? PMI Calculator calculates that dollar figure directly.
• Considering a refinance now that your LTV has improved? Refinance Calculator compares your current loan against a new offer’s terms and closing costs.