The Loan to Value Ratio (LTV) shows how much equity you have in a house relative to the amount you want to borrow or already have borrowed, and is one of the key risk factors assessed by lenders. A higher LTV ratio means higher risk for the lender, and may keep you from getting a loan. The highest LTV most lenders will accept is 95% with very good credit. Keep an eye on your LTV ratio over time as your mortgage balance is paid down, and as your house appreciates in value, because you may be able to eliminate the cost of monthly private mortgage insurance (PMI) if the ratio is below 80%.
How do you calculate loan to value?
- Enter your current morgage balance.
- Enter your second mortgage balance (if applicable).
- Enter your lien balance (if applicable).
- Enter your property value.
- The first loan-to-value ratio is calculated by dividing the current mortgage amount by the property value and the cummualtive loan-to-value ratio is calculated by dividing the morgage amount(s) by the property value.
Typically a loan-to-value ratio should be 80% or less to avoid having to add PMI.
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