Loan-to-Value (LTV) Calculator
What Is LTV and Why It Matters
The loan-to-value ratio is the single most important number in mortgage lending. It tells the lender how much of the home's value is financed — and therefore how much risk they're taking on.
Example: A $315,000 mortgage on a $450,000 home has an LTV of 70%. If the home were sold in a foreclosure for less than the full value, the lender at 70% LTV has a large equity cushion. A lender at 95% LTV has almost none — which is why high-LTV loans cost more.
Where LTV Comes From
- At purchase: LTV = loan amount ÷ purchase price (or appraised value, whichever is lower).
- At refinance: LTV = current balance ÷ current appraised value. The appraisal at closing determines the denominator, which is why home appreciation helps refinancing borrowers.
- For cash-out: LTV = (current balance + cash-out amount) ÷ current appraised value. Most conventional lenders cap cash-out LTV at 80%.
LTV Tiers and Interest Rate Impact
Lenders apply loan-level price adjustments (LLPAs) based on LTV tiers. These adjustments are added to your base rate or paid as upfront points. The difference between the best and worst conventional LTV tier can be 0.5–1.0% in rate or thousands of dollars in points.
| LTV Range | Tier | PMI Required? | Rate vs. Baseline |
|---|---|---|---|
| ≤ 60% | Premium | No | Best rates — often 0.25–0.5% lower |
| 61–70% | Excellent | No | Very competitive rates |
| 71–75% | Very Good | No | Near-best rates |
| 76–80% | Standard | No | Conforming baseline rate |
| 81–85% | Fair | Yes | ~0.25–0.5% premium + PMI |
| 86–90% | High | Yes | ~0.5–0.75% premium + PMI |
| 91–97% | Very High | Yes | Limited lenders, higher cost |
| > 97% | Above limit | Varies | FHA or VA programs only |
Key threshold: 80% LTV is the most important line in conventional lending. Above it, you pay PMI. Below it, you don't — and you typically receive better rate pricing. Every LTV tier you cross downward saves money on both your rate and PMI.
Combined LTV (CLTV) — When You Have Multiple Loans
If you have a second mortgage, HELOC, or any other lien on the property, lenders look at your Combined Loan-to-Value (CLTV) ratio — not just the first mortgage LTV.
Example: $315,000 first mortgage + $45,000 HELOC on a $450,000 home:
- First mortgage LTV: 70.0%
- CLTV: ($315,000 + $45,000) ÷ $450,000 = 80.0%
When refinancing your first mortgage, the lender will require the CLTV to stay within their guidelines — typically 80% for a rate-and-term refinance or 80% for a cash-out refinance (with the new balance including any cash taken out). If your CLTV is already near 80%, you may need to pay down the HELOC or subordinate it before refinancing.
Subordination
When you refinance your first mortgage, the second lender must agree to remain in second position (subordinate). Most HELOC lenders will cooperate, but some charge a subordination fee ($150–$350). If the second lender refuses, you must pay off the HELOC entirely before closing.
LTV for Cash-Out Refinancing
Cash-out refinancing lets you borrow against your home equity by taking a new loan larger than your current balance. The LTV after adding the cash determines whether you qualify and what rate you'll pay.
Conventional Loan Cash-Out Limits
- Standard conventional: Max 80% LTV. On a $450,000 home, you can borrow up to $360,000. If your current balance is $315,000, you can take out up to $45,000 in cash.
- Jumbo loans: Most jumbo lenders cap cash-out at 70–75% LTV.
- Texas: Constitutionally capped at 80% LTV for any cash-out refinance. The 80% is based on the appraised value, not the purchase price.
VA and FHA Cash-Out
VA loans allow eligible veterans to cash out up to 90% LTV with no PMI requirement. FHA cash-out allows up to 80% LTV but requires MIP (mortgage insurance premium) regardless of LTV. For most homeowners with conventional loans, 80% LTV is the practical maximum for cash-out.
Why 75% LTV Often Matters for Cash-Out
Even though the hard limit is 80%, many lenders price cash-out loans more favorably when the post-cash-out LTV stays at 75% or below. If you can take slightly less cash and land at 75%, you may qualify for a meaningfully lower rate — reducing the cost of the cash you do take out.
How to Improve Your LTV
A lower LTV unlocks better rates, eliminates PMI, and increases cash-out capacity. Three levers move LTV in your favor:
1. Pay Down Principal
Any extra payment made directly to principal reduces your loan balance and your LTV. Before refinancing, a targeted lump-sum payment can push you into a better pricing tier. Use the calculator to see exactly how much you'd need to pay to cross the 80%, 75%, or 70% thresholds.
2. Home Appreciation
Rising home values reduce LTV without any extra payments. A home that was worth $400,000 when you bought it at 90% LTV ($360,000 loan) may now appraise at $500,000 — reducing your LTV to 72% on the same balance. At refinance, the lender uses the current appraised value, so appreciation since purchase directly benefits your LTV position.
3. Get a New Appraisal
If home values in your area have risen since your last appraisal, ordering a new one can reveal a lower LTV than your current loan shows. Some lenders offer appraisal waivers using automated valuation models — ask your lender if an AVM can substitute for a full appraisal, which saves $400–$700.
Frequently Asked Questions
What is the loan-to-value ratio?
LTV is your mortgage balance divided by your home's appraised value, expressed as a percentage. A $315,000 loan on a $450,000 home is 70% LTV. Lenders use it to measure risk — lower LTV means more equity and less risk, which earns better rates.
Does LTV affect my mortgage interest rate?
Yes, materially. Fannie Mae and Freddie Mac apply loan-level price adjustments (LLPAs) based on LTV tiers. Crossing from 80% to 75% LTV can reduce your rate by 0.125–0.25%. Crossing from 90% to 80% can save even more — plus eliminate PMI, which often costs 0.5–1.5% of the loan balance annually.
What LTV do I need to avoid PMI?
For conventional loans, 80% LTV or below at origination avoids PMI. Once the scheduled amortization reaches 78% LTV based on the original purchase price, PMI must be cancelled automatically. You can request cancellation at 80% LTV with a good payment history. See the PMI Removal Calculator for your specific timeline.
How can I lower my LTV to get a better rate?
Three main ways: (1) pay down principal before refinancing, (2) wait for home appreciation so the new appraisal shows a higher value, or (3) bring cash to closing to buy down the balance before the new loan originates. Use the "Paydown to Reach LTV Tier" section above to see the exact dollar amount for each threshold.
Related Guides
- PMI Removal Calculator — When Does Your PMI Drop Off?
- Refinance Break-Even Calculator — How Many Months to Recoup Closing Costs?
- Mortgage Savings Calculator — Monthly, 5-Year, and Lifetime Savings
- Cash-Out Refinance Calculator Guide — How Much Equity Can You Access?
- How Much Can You Save by Refinancing?
- Refinance Situations — When It Makes Sense
- Full Refinance Calculator — Compare Multiple Lender Offers
Ready to See Your Full Refinance Picture?
The full RefinanceUSA calculator shows your monthly savings, break-even point, and net savings for multiple lender offers side by side — so you can see exactly which rate and term combination saves you the most given your LTV.
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