To calculate your loan-to-value ratio, divide your mortgage balance by the property’s value and multiply by 100. A $180,000 loan on a $225,000 home works out to an LTV of 80%. That single percentage tells a lender how much of the property they’re financing versus how much equity you hold, and it drives decisions about mortgage insurance, interest rates, and whether you qualify at all. Learning how to calculate loan-to-value ratio correctly, with the right inputs, is the difference between a number you can rely on and one that falls apart in underwriting.
The Two Numbers You Need
The formula is simple. Getting the correct version of each input is where people slip.
Property value. For a purchase, lenders use the lower of your contract price or the appraised value.1Fannie Mae. Loan-to-Value (LTV) Ratios Agreed to pay $300,000 but the appraiser came in at $285,000? The lender uses $285,000. For a refinance, the number comes from a new appraisal of current market value. Online estimates from real estate sites are not appraisals, and no lender will accept one in place of a formal valuation.
Loan balance. For a new purchase, that’s the amount you’re borrowing. For an existing mortgage, pull the current principal balance from your most recent statement. A formal payoff figure from your servicer will be slightly higher because it includes accrued interest and fees; use the principal balance for LTV, and reserve the payoff figure for actually closing out the loan.
Running the Math
Divide the loan by the value, then multiply by 100.
Purchase. A home appraises at $250,000 with a contract price of $260,000. The lender uses $250,000. You put down $25,000 and borrow $225,000. Divide $225,000 by $250,000, multiply by 100. Your LTV is 90%.
Refinance. You owe $180,000 and the new appraisal comes in at $300,000. $180,000 ÷ $300,000 = 0.60. Your LTV is 60%. If values have climbed since you bought, your LTV falls even without extra principal payments.
Underwater. A $220,000 balance on a $200,000 property gives an LTV of 110%. That’s negative equity, and it closes off most refinancing options outside of specialized programs.
When You Have a Second Loan or HELOC
If more than one loan is secured by the home, lenders switch to the Combined Loan-to-Value ratio (CLTV): first mortgage plus any home equity loan balance plus any drawn HELOC balance, all divided by the property value.2Fannie Mae. B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios A $200,000 first mortgage and a $50,000 home equity loan on a $320,000 home gives a CLTV of $250,000 ÷ $320,000, or about 78%.
A third variant catches people off guard. The Home Equity Combined LTV (HCLTV) counts the entire HELOC credit limit, not the drawn balance. A HELOC with a $75,000 limit and $20,000 drawn contributes $20,000 to CLTV but $75,000 to HCLTV.3Fannie Mae. Home Equity Combined Loan-to-Value (HCLTV) Ratios Some programs cap the HCLTV separately, so a comfortable CLTV doesn’t guarantee approval.
Why the 80% Mark Matters
The most consequential number in conventional lending is 80%. If your down payment is less than 20% of the purchase price, your lender requires private mortgage insurance (PMI), which protects the lender if you default.4Consumer Financial Protection Bureau. What Is Private Mortgage Insurance? PMI adds to your monthly payment without building any equity for you.
Under the Homeowners Protection Act, you can request that your servicer cancel PMI once the loan balance reaches 80% of the home’s “original value.” The request must be in writing, you must be current on payments, have a good payment history, certify no junior liens, and show the value hasn’t dropped below its original figure.5Consumer Financial Protection Bureau. When Can I Remove Private Mortgage Insurance (PMI) From My Loan?
“Original value” is the trap. For a purchase, it means the lower of the contract price or the appraised value at closing. For a refinance, it’s the appraisal at the time of that refinance.6Office of the Law Revision Counsel. 12 USC 4901 – Definitions Even if your home has appreciated substantially, the 80% cancellation calculation uses the original number, not today’s market.
If you never file a request, servicers must automatically terminate PMI on the date your principal is scheduled to reach 78% of original value under the amortization schedule, provided you’re current.7CFPB Consumer Laws and Regulations. HPA – Homeowners Protection Act (PMI Cancellation Act) The gap between 80% and 78% can be months of extra premiums, which is why the written request at 80% is worth filing.
FHA loans work differently. For FHA loans with case numbers assigned on or after June 3, 2013, the monthly mortgage insurance premium cannot be cancelled during the life of the loan; the only ways out are paying off the mortgage or refinancing into a different loan type.8U.S. Department of Housing and Urban Development. Single Family Mortgage Insurance Premiums
Maximum LTV by Loan Program
What counts as a workable LTV depends on the loan type.
Conventional
A conventional purchase of a single-family primary residence can go up to 97% LTV through certain programs, though anything above 80% brings PMI along with it. Cash-out refinances on a one-unit primary residence cap at 80%; two-to-four-unit properties cap at 75%.9Fannie Mae. Eligibility Matrix
FHA
FHA purchase loans allow up to 96.5% LTV with a credit score of at least 580, so 3.5% down.10Office of the Comptroller of the Currency. FHA 203(k) Loan Program Fact Sheet Lower scores can qualify with more down. The tradeoff is more expensive insurance that’s harder to shed.
VA and USDA
Both VA-guaranteed and USDA-guaranteed loans allow 100% financing.11Veterans Affairs. VA Home Loan Entitlement and Limits12Rural Development. Single Family Housing Guaranteed Loan Program Neither uses standard mortgage insurance, but both carry their own charges. The VA funding fee starts at 2.15% of the loan amount for first-time use with no down payment.13Veterans Affairs. VA Funding Fee and Loan Closing Costs USDA loans charge an upfront guarantee fee plus an annual fee. VA eligibility requires qualifying military service; USDA requires a property in a designated rural area.
Investment and Multi-Unit
Non-owner-occupied properties get tighter limits. Fannie Mae caps single-unit investment purchases at 85% LTV. Multi-unit investment properties drop to 75% for purchases and 70% for cash-out refinances.9Fannie Mae. Eligibility Matrix Owner-occupied two-to-four-unit properties fare better, with purchase LTV allowed up to 95% under automated underwriting.14Freddie Mac. Maximum LTV/TLTV/HTLTV Ratio Requirements for Conforming and Super Conforming Mortgages Cash-out refinances on multi-unit properties top out at 75% regardless of occupancy.
Renovation Loans Use a Different Value
If you’re using an FHA 203(k) or similar rehab loan, the standard LTV formula doesn’t apply cleanly. The property value is the lesser of (a) the current as-is value plus total rehabilitation costs, or (b) 110% of the appraised after-improved value.10Office of the Comptroller of the Currency. FHA 203(k) Loan Program Fact Sheet
Take a $150,000 fixer-upper expected to be worth $220,000 after $60,000 in work. The denominator isn’t $150,000. It’s the lesser of $210,000 (as-is plus rehab) or $242,000 (110% of after-improved), so $210,000. Your loan divided by $210,000 gives the LTV.
Mistakes That Break the Number
The math rarely goes wrong. The inputs do. Substituting an online estimate for a formal appraisal produces a figure no lender will honor. Overlooking a second lien or HELOC when computing CLTV surfaces during underwriting and can hold up closing.
For PMI removal, the recurring error is assuming current market value drives the calculation. The Homeowners Protection Act ties both the 80% cancellation request and the 78% automatic termination to original value.6Office of the Law Revision Counsel. 12 USC 4901 – Definitions A 30% appreciation doesn’t help you meet the statutory threshold if your principal balance is still above 80% of the original figure. From there, you can ask the servicer whether it will accept a new appraisal reflecting current value (some do, some don’t), or refinance into a new loan where the appraisal at closing becomes the new baseline.