Loan-to-Value (LTV) Calculator

Understanding the loan-to-value (LTV) calculator — concept and principle

Loan-to-value (LTV) is the size of a loan compared with the value of the property that secures it. Lenders use it to judge risk: the less equity a borrower has, the more the lender stands to lose if the property must be sold. LTV affects whether you are approved, the interest rate you are offered and, in the US, whether you must pay mortgage insurance. This calculator gives your LTV, the maximum loan at a target LTV, and the extra down payment needed to reach it.

How it is calculated

• LTV (%) = loan amount ÷ property value × 100.
• Maximum loan at the target = property value × target LTV ÷ 100.
• Equity (down payment) = property value − loan; equity share = 100% − LTV.
• Extra down payment needed = loan − maximum loan, if positive; otherwise zero.

Lenders usually use the lower of price and appraisal.

The principle

LTV is a cushion measure. If a home bought with 80% LTV falls 10% in price, the owner's equity drops from 20% to about 11% of the new value, but the loan is still fully covered. At 95% LTV, a small price fall can leave the loan larger than the home is worth ("negative equity"). That is why lenders charge more, require insurance, or refuse loans as LTV rises, and why many financial regulators set LTV caps for housing loans to limit household debt and bank losses.

Worked example

Default inputs: property value $400,000, loan $320,000, target LTV 80%.

1. LTV = 320,000 ÷ 400,000 × 100 = 80%, within the 80% limit.
2. Maximum loan at 80% = 400,000 × 0.80 = $320,000.00.
3. Equity = 400,000 − 320,000 = $80,000.00, an equity share of 20%.
4. Extra down payment to reach 80% = max(0, 320,000 − 320,000) = $0.00.

How to read the result

Lower is safer and usually cheaper. In the US, conventional loans above 80% LTV generally require private mortgage insurance (PMI), and under the Homeowners Protection Act PMI can be cancelled on request at 80% of the original value and ends automatically at 78% on schedule. Other countries set their own caps, often varying by region, buyer type or number of homes owned, and they change with policy, so check the current rule with your lender or regulator.

Common mistakes

• Dividing by the purchase price when the appraisal came in lower (lenders use the lower figure).
• Confusing LTV with debt-to-income (DTI) or DSR, which measure ability to repay.
• Forgetting a second mortgage: combined LTV (CLTV) adds all loans secured by the property.
• Assuming the LTV cap is the amount you will actually be lent; income tests may limit it further.

Frequently asked questions

What is a good LTV?

80% or less is a common benchmark for standard pricing; 60% or less often earns the best terms.

How do I lower my LTV?

Put more money down, pay down principal, or wait for the property's value to rise and request a new appraisal.

What is CLTV?

Combined LTV adds every loan secured by the property, such as a first mortgage plus a home equity line, and divides by the value.

Sources: Consumer Financial Protection Bureau, "What is a loan-to-value ratio?" · Homeowners Protection Act of 1998 (PMI cancellation and termination)