What is a good loan-to-value ratio?

80% or lower is a common benchmark because it avoids PMI on conventional loans and often brings better pricing.

Combined loan-to-value adds all loans secured by the property, such as a first mortgage and a home equity line, and divides by the value.

Can LTV be over 100%?

Yes, if the home's value falls below the loan balance. This is called being underwater or having negative equity.

Mortgages & financing

Loan-to-Value Ratio (LTV)

Also called LTV, loan-to-value

In short

Loan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.

Formula

Loan amount ÷ property value

Value used

Lower of price or appraisal

PMI threshold

Above 80% (conventional)

Inverse of

Equity percentage

How LTV is calculated

LTV = loan amount ÷ property value × 100.

On a purchase, lenders use the lower of the price or the appraised value. On a refinance or home equity loan, they use the current appraised value. Your equity percentage is simply 100% minus LTV.

Why LTV matters

LTV affects whether you need PMI, what rate you get, and whether you qualify at all. Cash-out refinances and investment property loans usually have lower maximum LTVs than primary-home purchases.

LTV in investing

Hard money lenders often lend based on a percentage of purchase price plus repairs, or a percentage of after repair value (sometimes called ARV-LTV). In the BRRRR method, the refinance LTV sets how much cash you can pull back out.

The formula

LTV = Loan amountAppraised value or price, whichever is lower × 100

Try it in the Mortgage Calculator →

Example

LTV on a purchase

A buyer agrees to pay $250,000 and the appraisal comes in at $245,000. They borrow $220,500. LTV = $220,500 ÷ $245,000 = 90%. Because LTV is above 80%, a conventional lender will require PMI.

Loan-to-Value Ratio (LTV) vs. Debt-to-Income Ratio (DTI)

Loan-to-Value Ratio (LTV)

Loan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.

Debt-to-Income Ratio (DTI)

Debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments. Lenders use it to decide how large a mortgage payment you can afford.

The differenceLTV measures the loan against the property's value; DTI measures your debts against your income.

Frequently Asked Questions

Related terms

Home EquityMortgages & financingHome equity is the portion of a property you own outright: its current market value minus everything owed on it. It grows as you pay down the loan and as the home's value rises.Private Mortgage Insurance (PMI)Mortgages & financingPrivate mortgage insurance (PMI) protects the lender, not the borrower, if a borrower defaults on a conventional loan. It is usually required when the down payment is less than 20% of the home's value.AppraisalBuying & closingAn appraisal is a licensed appraiser's independent estimate of a property's market value. Lenders require one to make sure the home is worth at least the amount being borrowed.Down PaymentMortgages & financingA down payment is the part of a home's purchase price the buyer pays upfront in cash rather than borrowing. It is usually stated as a percentage of the price and is due at closing.RefinanceMortgages & financingTo refinance is to replace an existing mortgage with a new one, usually to get a lower rate, change the loan term, or take cash out of the home's equity.After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.Hard Money LoanMortgages & financingA hard money loan is a short-term loan from a private lender, secured mainly by the property's value rather than the borrower's income. Investors use it to buy and renovate properties quickly.MortgageMortgages & financingA mortgage is a loan used to buy real estate, secured by the property itself. If the borrower stops paying, the lender can take the property through foreclosure to recover what is owed.

Learn more in the knowledge base

How to Finance a Foreclosure or Distressed PropertyGuide · 7 min readDistressed properties are harder to finance than move-in-ready homes. Condition, timing and the seller's terms all limit which loans will work. This guide matches financing options to each kind of distressed purchase and explains the trade-offs.How Much House Can You Afford?Guide · 6 min readThe right price is the one you can pay every month without strain and still keep savings for repairs and emergencies. This guide shows how lenders measure affordability, what they leave out, and how to build a budget that works for you.How to Get Pre-Approved for a MortgageGuide · 7 min readA pre-approval tells you, and the sellers you make offers to, how much a lender is prepared to lend after checking your income, assets and credit. This guide explains how it differs from pre-qualification, what to gather, how to compare lenders and what can change the answer before closing.

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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.