Loan-to-Value (LTV)
The loan amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower).
LTV is one of the most important numbers in mortgage underwriting. A purchase at $400,000 with a $320,000 loan is 80% LTV; the same purchase with $360,000 borrowed is 90% LTV. Higher LTV means less borrower skin in the game and more lender risk.
LTV drives pricing, most rate sheets break down pricing by LTV bands (60%, 70%, 75%, 80%, 85%, 90%, 95%). It also controls mortgage insurance: conventional loans above 80% LTV require PMI; FHA has its own MIP regardless of LTV; VA and USDA have no traditional PMI but charge their own funding fees.
On refinances, LTV is calculated against the appraised value of the home, not the original purchase price. That makes appreciation a powerful tool for borrowers, a home that's grown in value over time can fund a refinance without bringing cash to lower the LTV.
Related terms
Other terms you'll see alongside Loan-to-Value
An independent valuation of a property by a licensed appraiser, used to confirm that the home is worth what the buyer agreed to pay.
An insurance policy that protects the lender if a borrower defaults on a conventional loan with less than 20% down.
The portion of your home's value you own outright, calculated as current value minus what you owe on the mortgage.
The portion of a home's purchase price the buyer pays out of pocket up front, with the mortgage covering the rest.
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