Know your LTV — and what it costs you

LTV is the loan amount divided by the property value, expressed as a percentage. A $320,000 loan on a $400,000 home is 80% LTV. It's the lender's main measure of risk.

LTV = (Loan Amount ÷ Property Value) × 100. If you know the down payment instead: LTV = 100% − Down Payment %. The two are complementary.

Under 80% is generally considered good — you avoid mortgage insurance in most markets and qualify for better rates. Under 60% is excellent and unlocks the best pricing.

80% LTV is the threshold below which mortgage insurance is usually not required — PMI in the US, CMHC in Canada, LMI in Australia. It's also where most lenders offer their best rates.

Private Mortgage Insurance — required in the US when LTV is above 80%. It protects the lender if you default. Typically 0.3%–1.5% of the loan per year. Can be cancelled once you reach 80% LTV.

Canada Mortgage and Housing Corporation insurance — required in Canada when LTV is above 80%. The premium is 2.8%–4% of the loan and is usually added to your mortgage balance.

Lenders Mortgage Insurance — required in Australia when LTV is above 80%. It protects the lender. Usually 1%–3% of the loan, added to the balance. Cancellable once you reach 80% LTV.

Lower LTV usually means a lower rate. Lenders price by LTV band — a 60% LTV loan is less risky than a 90% LTV loan, so it gets a lower rate. The difference can be 0.25%–0.75% or more.

Yes. Every payment reduces your loan balance (lowering LTV). Home appreciation raises the property value (lowering LTV further). Home depreciation raises LTV. Prepayments accelerate the drop.

Combined Loan-to-Value — LTV including all loans secured by the property (first mortgage + second mortgage + HELOC). Lenders use CLTV when evaluating additional borrowing or refinancing with a second lien.

Four ways: (1) bigger down payment upfront, (2) pay down the loan faster, (3) wait for home appreciation, (4) refinance with a lower loan amount. Prepayments and appreciation are often the fastest paths.

Most refinance programs allow up to 80%–97% LTV, depending on loan type. Conventional refinances usually max at 80% without PMI. FHA refinances allow up to 97%. Cash-out refinances often max at 80%.

Rarely. Some government-backed programs allow up to 97% (US FHA) or even 100% (VA loans for veterans). In the UK, "95% LTV" deals exist but are limited. Above 95%, approval is difficult and rates are high.

Yes. Lenders use the lower of the purchase price or appraised value. If the appraisal comes in low, your LTV rises — you may need a bigger down payment, or the deal may need to be renegotiated.

Two ways: (1) a lower loan amount means a lower P&I payment, and (2) a lower rate reduces the payment further. If LTV is above 80%, mortgage insurance adds to the monthly cost too.

Yes. Lenders have maximum LTV limits by loan type and borrower profile. Above those limits, your application is declined regardless of income. Typical maximums: 80% conventional, 90%–95% for strong borrowers, 97% FHA.

They're two sides of the same coin. Down payment 20% means LTV 80%. Down payment 10% means LTV 90%. LTV = 100% − Down Payment %.

Usually, yes. In the US, PMI must be cancelled automatically at 78% LTV (based on the original amortization schedule) and can be cancelled on request at 80% LTV. Contact your lender — some don't auto-remove it.

Once a year, or after any major market move. If you're close to 80%, checking quarterly helps you cancel PMI the moment you qualify. If you're considering refinancing, checking LTV before applying saves time.

Yes. Investment property loans typically max at 75%–80% LTV (vs. 90%–97% for owner-occupied). Rates are also higher, and lenders may require additional reserves.

Yes — this is called a "piggyback loan." You take a first mortgage at 80% LTV and a second (HELOC or fixed second) for part of the difference. The first mortgage avoids PMI, but the second usually has a higher rate. Math depends on the rate spread.

They use the current appraised value, not the original purchase price. If your home has appreciated significantly, your LTV may be much lower than when you bought — which unlocks better rates.

Yes. Lenders usually cap CLTV (Combined LTV) at 80%–85% for home equity loans or HELOCs. Your available credit is the difference between the cap and your current CLTV, multiplied by the home value.

Yes, usually for two reasons: (1) a smaller loan means a smaller P&I payment, and (2) below 80% LTV you don't pay PMI. Both effects stack.

This is called "negative equity" or being "underwater." You owe more than the home is worth. It usually happens after a price drop. You can't refinance or sell without bringing cash to closing. It resolves as you pay down the loan or prices recover.

Usually, but not always in a straight line. Lenders price by LTV bands — the difference between 85% and 84% LTV may be zero, but the jump from 81% to 80% is often significant (PMI drops off).

Not usually on LTV itself — it's a hard risk metric. But you can negotiate the rate within an LTV band, or ask the seller to reduce the price (which lowers the loan amount and hence LTV).

Typically 60% or below. This is the "best rate" tier in most markets. Below 80% avoids PMI. Between 60% and 80% you get standard rates, and above 80% you pay a premium.

No. If you're paying cash, there's no loan and no LTV. LTV only applies when a property secures debt.

No. LTV measures the loan against the property value (a risk metric). DTI (Debt-to-Income) measures total debt payments against income (an affordability metric). Lenders use both when deciding whether to approve a loan.

No. Points reduce your interest rate, not your LTV. LTV is set by the loan amount vs. property value. To lower LTV, you must reduce the loan or increase the value.

Yes. Maximum LTV varies by loan type: conventional (usually 80%–97%), FHA (up to 96.5%), VA (up to 100%), USDA (up to 100%), jumbo (usually 80%). Each has different rules.

Not mathematically, but lenders do verify the source. Gifted down payments are usually allowed with documentation. Lenders check that it's not borrowed, because a borrowed down payment would increase your debt load.

Jumbo loans (above the conforming limit — $766,550 in most US markets for 2024) typically cap at 80% LTV. Some lenders go up to 90% for very strong borrowers, but rates are higher.

Only if the math works. Refinancing costs 2%–5% of the loan amount. You need the rate reduction and PMI savings to outweigh those costs within a reasonable break-even period. Run the numbers in the Mortgage Refinance Calculator.

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