LTV stands for “loan to value.” “Loan to value” means a comparison of the outstanding mortgage debt on the property compared to the appraised value of the home.

When buying a home, lenders use the LTV ratio to assess the risk of giving the borrower a mortgage on the property.

An LTV ratio of 80% and below qualifies as “good” for most mortgage lenders.

Lenders generally like to see a 60% and lower LTV ratio. Borrowers in this range receive the best interest rates due to the low risk they pose for the lender.

Combined loan-to-value (CLTV) measures the total property indebtedness compared to the value and provides a percentage that lenders use to determine the overall risk in making a specific loan.

You can use an online calculator to determine the combined loan to value, or you can use the following formula to calculate the amount manually:

CLTV = (Total Amount of All Loans / Appraised Property Value) x 100

The amount of all loans is the remaining balance left on the first mortgage added to any other loans or mortgages liens on the property.

These might include second loans or home equity lines of credit.

Lenders would generally view this CLTV as a low risk due to the amount of equity in the home.

Calculating the Private Mortgage Insurance (PMI) requires some basic information, including the total amount of the mortgage and the professional appraisal value of the house.

The formula for the LTV for PMI is:

(Loan Amount ÷ Appraised Value) x 100 = LTV % 

Our example home has a mortgage of $100,000 and an appraisal of $150,000.

($100,000 ÷ $150,000) x 100 = 66.66%

That LTV percentage would require you to pay for a PMI insurance policy for the loan.

Lenders generally require PMI for any loan that has an LTV ratio of 80% or higher. Loans under the 80% marker can avoid the additional costs of PMI.

To calculate the loan-to-value for a home equity line of credit (HELOC), follow these steps: 

• Have a professional home appraisal completed on the home.
• Locate the current balance on your first mortgage.
• Divide the mortgage balance by the appraisal value.
• Multiply by 100 to convert the number to a percentage.

An 80% LTV ratio is typically the benchmark of a good refinance mortgage loan. That figure allows the borrower to avoid PMI costs.

The biggest advantage of a 95% LTV mortgage is the low down required to purchase. The 5% down payment makes home ownership easier for many home buyers.

Other advantages include the possibility of additional years of write-offs for mortgage interest on federal income tax filings.

The LTV for a new home purchase is based on the lower number of the purchase price or the home’s appraised value.

Refinancing uses only the appraised value of the home.

The lowest loan-to-value mortgages available are finance instruments backed by three federal government agencies.

Qualified buyers can receive 100% financing for their home purchase from this duo, but they have applicant restrictions.

VA Mortgages

Zero LTV ratio mortgages are also available from the US Department of Veteran Affairs. A VA loan is restricted to active service members, veterans, and surviving spouses of active and former service members. 

USDA Loans

United States Department of Agriculture (USDA) loans also offer the option of 100% financing for buyers in low- or moderate-income levels. These homes must be located in rural areas or in some suburban neighborhoods nearby targeted for redevelopment or renovation. 

FHA Loans

The Federal Housing Administration (FHA) partners with local lenders to back mortgages with an LTV of up to 96.5%. 

While not a full 100% financing, a low LTV FHA loan is typically available from special lending programs that require only a 3% down payment.

Learn more about qualifying for an FHA loan.

A conventional mortgage typically has a maximum LTV of 80%, while the maximum on VA and USDA loans is 100%. 

The maximum loan-to-value ratio sets the loan limit compared to the value of the property. The maximum LTV mortgage depends on the type of loan the borrower selects.