Your loan-to-value, or “LTV” ratio indicates how much you owe on your mortgage versus how much your home is worth. The calculation comes into play during any mortgage application — both when purchasing a home and when refinancing.
The loan-to-value ratio, commonly referred to as LTV, compares your mortgage balance to your home’s worth and is expressed as a percentage. So if you have a 40% LTV, that means your mortgage loan amounts to 40% of your home’s total value.
Your LTV ratio plays an important role in your mortgage application. Lenders use it to evaluate how risky you are as a borrower. If your loan-to-value ratio is high, the lender might have a hard time selling the house and making its money back if you fall behind on payments. If it’s low, your home loan is less of a risk and more likely to be approved.
LTV has a converse relationship with equity. The more equity you have in your home, the lower your LTV will go, and vice versa. This is why making a larger down payment can lower your LTV.
Credible’s LTV calculator can tell you what your loan-to-value ratio is on up to three mortgages. To use the tool, make sure you have the following information on hand:
Once you enter the above information, you should see your LTV displayed for each loan, as well as your cumulative LTV.
COMPARE HOME LOAN RATES
Mortgage rates drop or rise daily, reacting to changing economic conditions, central bank policy decisions, and investor sentiment. The table shows current mortgage interest rates and APRs by loan term.
Product | Interest rate | APR | ||||
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General Information and Rate Disclosures: The listings that appear on this page are from companies that pay Credible compensation. This table does not include all companies or all available products. Displayed information is valid as of Dec 13, 2024 and assumes a customer with a 750 credit score borrowing a conventional loan for a single-family, primary residence, at or near zero discount points, and a 80% loan-to-home-value ratio. For products indicated as a jumbo (e.g. 30-year fixed jumbo rate), displayed information follows the same assumptions as a conventional loan but set at loan above the conforming limit. Here is an example of your payment based on a $400,000 loan amount, for each advertised loan term:
*Payments do not include amounts for taxes and insurance premiums, your actual payment obligation will be greater. The IP address of the customer accessing this page has been used to determine which U.S state should be used for pricing. In states where Credible does not have a license to operate, we are providing information about rates available in a nearby state. If you are viewing this page from an IP address in one of the states where Credible is not licensed, the rates displayed above are for consumers located in the neighbouring state shown below: IP state without license - Assumed location Missouri - Kansas Hawaii - California Rates, payments, and all information displayed are for informational purposes only and are subject to change without notice. This is not a credit decision or commitment to lend. Mortgage rates and terms you may qualify for depend on your individual financial circumstances. Payment Disclosures: All monthly payment amounts above assume on time monthly payments each month for the full duration of the loan term (e.g. 360 monthly payments for a 30 year loan). Displayed monthly payment amounts do not include amounts for property taxes and hazard insurance. Your actual monthly payment obligation will be higher. Amounts for borrower-paid mortgage insurance premiums are included in the monthly payment if (1) the loan amount is below the “conforming thresholds” set by Fannie Mae and Freddie Mac, and (2) the loan-to-home-value ratio is greater than 80%; mortgage insurance premiums are excluded from the monthly payment if either the loan amount is above the conforming thresholds or the loan-to-home-value ratio is less than or equal to 80%. Your actual payment obligation may be higher. “Conforming thresholds” depend on the county where the property is located. Fees Disclosures: The fee amounts shown above include estimates of loan costs and closing costs you may pay in connection with a mortgage transaction with the assumptions above. This includes fees the lender charges, including points and underwriting fees, and third party services the lender does not let you shop for such as a flood certification fee. It does not include title charges, recording costs, prepaids, initial escrow deposit, and other fees. ARM Disclosures: Variable rate products, such as ARMs, have interest rates that can change over the life of the loan. Changes in the interest rate will cause required payment amounts to change.” The displayed rate and payment will be in effect for the number of years in the product’s description (e.g. 5/1 ARM means the initial rate and payment are in effect for 5 years, 7/1 means they are in effect for 7 years, etc.), after which the rate and monthly payment will change every 12 months. Last updated on Dec 13, 2024. These rates are based on the assumptions shown here. Actual rates may vary. |
Most lenders have a maximum LTV they’ll allow, which can vary anywhere from 80% to 95%, depending on the type of loan and other factors. Loans with higher LTVs typically require mortgage insurance and come with higher interest rates.
Using a loan-to-value calculator can help you gauge the likelihood of qualifying for a loan (as well as what interest rates you can expect). It can also help you:
The more you put down on the home, the lower your LTV is. A lower LTV will make it easier to qualify for your loan and potentially mean a lower interest rate as well. That means saving significantly over the course of your loan term.
Private mortgage insurance is typically required when making a down payment of 20% or less. And according to Freddie Mac, it can cost you anywhere from $30 to $70 per month. If you can get your LTV to 80% or below, you can remove PMI and lower your monthly payment.
To refinance your mortgage loan, you’ll need an LTV of 80% to 95%, depending on your goals for the refinance. Cash-out refinances, which allow you to take money out of your home equity, require a lower LTV than traditional refinances.
A cash-out refinance usually requires at least an 80% LTV or lower. A lower LTV might also allow you to take out more cash as well.
CALCULATORS
REFINANCE CALCULATORS
In many cases, a high LTV won’t keep you from getting a mortgage loan. Generally, though, a lower LTV will mean more favorable terms on that loan — including a lower interest rate or access to more cash in a refinance.
If you’d like to lower your LTV before applying for your loan, try the following strategies.
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