What Is Loan-to-Value Ratio (LTV)?

Your loan-to-value ratio (LTV) compares the amount you’re borrowing to the appraised value of the property, expressed as a percentage. Lenders rely on LTV to measure risk — the higher your LTV, the riskier the loan.

On a $400,000 home with a $60,000 down payment, your loan amount is $340,000 and your LTV is 85%. Because that exceeds 80%, you would need private mortgage insurance (PMI) on a conventional loan, adding roughly $100–$250 per month. Once your LTV drops to 80% through payments or appreciation, you can request PMI removal and lower your monthly cost.

Key Facts

• Formula: Loan amount ÷ appraised value × 100
• PMI threshold: Conventional loans require PMI when LTV exceeds 80%
• Maximum conventional LTV: 97% with qualifying programs (3% down)
• FHA maximum LTV: 96.5% (3.5% down)
• VA/USDA maximum LTV: 100% (zero down payment)
• Best pricing: LTV at or below 75% typically unlocks the lowest rates

Frequently Asked Questions

How is LTV different from down payment?

They are two sides of the same coin. If you put 10% down, your LTV is 90%. A higher down payment lowers your LTV, which reduces lender risk, eliminates or reduces mortgage insurance, and often secures a better interest rate.

Can my LTV change after closing?

Yes. Your LTV decreases as you pay down principal and as the home appreciates in value. You can request a new appraisal to document increased value and potentially remove PMI once your LTV reaches 80% or below.