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Loan-to-Value Calculator

Your loan-to-value, or “LTV” ratio indicates how much you owe on your mortgage versus how much your home is really worth. The calculation comes into play during any mortgage application — both when purchasing a home and when refinancing.

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    What is a loan-to-value (LTV) ratio?

    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.
     

    How to use our LTV calculator

    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:

    • Market value of home: This is how much the home appraises for. You can typically search public records to find this information.
    • Remaining loan balance: If you’re refinancing, this is how much is left on your existing mortgage loan. If you’re buying a home, it’s the amount you’d need to borrow to make the purchase.
    • Second mortgage or lien balance (optional): If you have a second mortgage, home equity line of credit (HELOC), home equity loan, or any lien on other properties, you can include that information as well. A lien is a type of legal claim against a property for unpaid debts.
    • Other liens (optional): If you have liens on any other properties, put that here.

    Once you enter the above information, you should see your LTV displayed for each loan, as well as your cumulative LTV.

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    What to do with a loan-to-value calculator

    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:

    Decide how much money to put down

    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.

    Determine if you can get rid of PMI

    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.

    Figure out whether you can refinance

    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.

    See if you can take cash out of your home

    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.
     

    How to improve your LTV

    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.

    If you’re buying a new home

    • Opt for a less expensive home: You’ll need to borrow less for a lower-priced home, and your down payment will go further. This will lower your LTV and might even help you avoid PMI.
    • Make a bigger down payment: The bigger the down payment, the lower your LTV will go. Just make sure you have enough left over for closing costs and unexpected emergencies once you’re in the home.

    If you’re refinancing your home

    • Improve your home value with renovations: Choose renovations that increase your home’s value, such as a kitchen remodel or siding replacement. You might need an appraisal to prove your home’s new worth.
    • Get a new appraisal: Instead of going off what the original appraiser said years ago, get a new appraisal done and see if your home has appreciated over time. Keep in mind though, that this might mean paying more in property taxes next year.
    • Make extra mortgage payments: If you know you’ll be refinancing soon, you might want to make larger-than-required mortgage payments. The more you can reduce your balance, the lower that LTV will go. Just be sure to keep your budget in mind when determining how much more to spend.
       

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