Loan-to-Value Ratio (LTV)
Loan-to-Value Ratio is the percentage of a property's appraised value that is financed through the mortgage. It is calculated by dividing the loan amount by the property value.
LTV is one of the most important metrics in mortgage lending. A lower LTV indicates more equity and less risk for the lender, which often translates to better rates and fewer pricing adjustments for the borrower.
LTV is not the same as your down payment percentage — though they are related. A 10% down payment on a $300,000 home results in a 90% LTV. Certain programs and pricing tiers are based on specific LTV thresholds (e.g., 80%, 90%, 95%).
Why This Matters: Your LTV affects your rate, your mortgage insurance requirements, and your loan program eligibility. Knowing where you fall on the LTV scale helps you understand why your loan is priced the way it is.
Example of Loan-to-Value Ratio: If you buy a $300,000 home and borrow $270,000, your loan-to-value ratio is 90%. A lower LTV generally means less risk for the lender and can result in better interest rates.
For example, USDA loans allow eligible buyers in Louisiana to purchase with zero down — see which areas qualify on our USDA eligible areas in Louisiana page.
Common question
How is LTV calculated?
LTV is the loan amount divided by the property value (usually the appraised value or purchase price, whichever is lower). A $270,000 loan on a $300,000 home is 90% LTV.
Why does LTV matter?
Lower LTV means more equity and less risk for the lender, which often means better rates and fewer fees. LTV also determines when PMI can be removed on conventional loans.
Related Topics
Not sure where your LTV falls? A quick review of your numbers can show you where you stand.
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