Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Loan-to-value divides what you owe by what the property is worth. A $320,000 balance on a $400,000 home is 80 percent, which leaves $80,000 of equity. Lenders read that ratio as risk: the lower it is, the more of the price is your money, and many conventional lenders start requiring mortgage insurance above 80 percent. The ratio moves in two ways, as the balance is paid down and as the value changes, and the second move is not in your control.
Before you rely on it
What to check
Use a current value, not the purchase price from years ago. Lenders rely on an appraisal, and an appraisal can come in below what a listing site suggests.
The common error
Where people go wrong with loan-to-value calculator
Treating equity as spendable cash. The $80,000 here is a paper figure, and selling costs, fees and a falling market all reduce what it would actually deliver.
Sensitivity evidence
How loan balance changes the loan-to-value
| Loan balance | Loan-to-value | Estimated equity |
|---|---|---|
| $256,000 | 64.0% | $144,000 |
| $288,000 | 72.0% | $112,000 |
| $320,000worked example | 80.0% | $80,000 |
| $352,000 | 88.0% | $48,000 |
| $384,000 | 96.0% | $16,000 |
Every input, tested
Which input moves the loan-to-value most
| Input | Tested from | To | Loan-to-value at each end | Swing |
|---|---|---|---|---|
| Loan balance | $288,000 | $352,000 | 72.0% to 88.0% | 16.0% (20%) |
| Property value | $360,000 | $440,000 | 88.9% to 72.7% | 16.2% (20%) |
Two variables at once
Loan-to-value by loan balance and property value
| Loan balance \ Property value | $320,000 | $400,000 | $480,000 |
|---|---|---|---|
| $256,000 | 80.0% | 64.0% | 53.3% |
| $288,000 | 90.0% | 72.0% | 60.0% |
| $320,000 | 100.0% | 80.0% | 66.7% |
| $352,000 | 110.0% | 88.0% | 73.3% |
| $384,000 | 120.0% | 96.0% | 80.0% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Loan balance | $320,000 |
| Property value | $400,000 |
| Loan-to-value | 80.0% |
| Estimated equity | $80,000 |
Where the inputs come from
Loan balance is what you owe on the first mortgage, and property value is the appraised value or a recent comparable-based estimate, not the price you hope to get. For a purchase, use the lower of the contract price and appraisal, since lenders lend against the lower figure. If you have a second lien or HELOC, add its balance to compute combined loan-to-value.
When the result stops applying
An automated estimate can differ from an appraisal by several percent, and a market decline lowers value without any change in your loan. Lenders may require appraisals only in certain cases and may accept waivers on refinances. LTV limits differ by loan type, occupancy and state.
What to compare it with
Use LTV to plan milestones: when PMI can be removed, when a refinance gets a better tier, and how much equity supports a home equity loan. For a purchase, a lower LTV also improves your rate. If your value is uncertain, use a range of values and see how LTV changes. Pair the result with the PMI calculator and the home equity calculator, which turn the ratio into dollars, and remember that lenders rely on the appraisal, not your estimate.
People also ask
Frequently asked questions
What LTV do I need to avoid PMI?
Eighty percent or lower on a conventional loan, meaning at least a 20% down payment or 20% equity, which removes the need for private mortgage insurance.
Is LTV the same as combined LTV?
No. LTV counts one loan, while combined LTV adds every lien on the property, such as a home-equity loan.
Can LTV be over 100%?
Yes, when you owe more than the property is worth. That situation is called being underwater, and it makes refinancing or selling difficult until values recover.