How the LTV Calculator — Loan to Value works
Loan-to-value (LTV) is the ratio lenders use to measure how much of a property's value is financed with debt versus how much equity (or down payment) stands behind the loan. It is one of the first numbers an underwriter checks, because it drives whether mortgage insurance is required, what interest rate is offered, and how much cushion exists if the property has to be sold.
The formula
LTV is calculated as:
LTV = Loan Amount / Property Value x 100
Property value means the appraised value or the purchase price, whichever the lender treats as lower. A $280,000 loan on a $350,000 home gives LTV = 280,000 / 350,000 x 100 = 80%. The remaining 20% ($70,000) is the borrower's equity or down payment.
Combined loan-to-value (CLTV)
When a property carries more than one loan — a first mortgage plus a second mortgage or home equity line of credit (HELOC) — lenders also compute combined loan-to-value (CLTV):
CLTV = (Loan Amount + Other Liens) / Property Value x 100
CLTV is always equal to or higher than the first loan's standalone LTV, and it is the figure a second-lien or HELOC lender relies on to assess how much unencumbered equity actually remains.
Why LTV matters
- Mortgage insurance: most conventional lenders require private mortgage insurance (PMI) once LTV exceeds 80%, since a smaller down payment means less cushion if the borrower defaults.
- Program eligibility: conventional loans typically cap financing around 97% LTV, FHA loans allow up to roughly 96.5% LTV (with mortgage insurance premium, or MIP), and eligible VA loans can reach 100% LTV with no monthly PMI.
- Pricing: a lower LTV generally supports a lower interest rate, because the lender's exposure relative to the collateral is smaller.
Common interpretation mistakes
- Using the purchase price when the appraisal came in lower — lenders use the lower of the two, so LTV based on purchase price alone can understate the real ratio.
- Forgetting a second lien: a first-mortgage LTV of 75% can still carry a CLTV well above 90% once a HELOC is added in.
- Assuming PMI disappears automatically at 80% LTV — on many loans it must be requested once the original LTV schedule reaches 80%, and it is typically cancelled automatically only at 78%.
When to escalate to a specialist
This calculator applies the standard LTV and CLTV formulas to the numbers you enter. Actual loan approval, mortgage insurance cost, and interest rate also depend on credit score, debt-to-income ratio, loan program rules, and lender overlays that this tool does not model — confirm final figures with a loan officer or mortgage broker before making a financing decision.