About Loan to Value (LTV) Calculator
When you ask a bank for a mortgage, they look at two main ratios: Debt-to-Income (DTI) and Loan-to-Value (LTV). LTV measures the risk of the loan relative to the asset. It answers: "How much of this house does the bank own versus you?"
The Risk Spectrum
LTV = Mortgage Amount / Appraised Property Value
- 80% LTV or lower: The Gold Standard. The borrower has significant "skin in the game" (20% equity). Lenders offer the best interest rates and do not require PMI.
- 81% - 97% LTV: High Ratio Loan. The lender considers this riskier. You will likely pay Private Mortgage Insurance (PMI) to protect the lender if you default.
- >100% LTV: "Underwater". You owe more than the house is worth. This happens if values drop. You cannot sell the home without bringing cash to the table.
Refinancing Strategy
LTV is critical for refinancing. Most lenders require you to have at least 20% equity (80% LTV) to do a "Cash-Out Refinance". If your home value has gone up, your LTV has gone down, potentially unlocking cheap money.
How to Use
Enter the Loan Amount and the Property Value to see your risk ratio instantly.