Mortgage Glossary
Loan-to-Value Ratio
A percentage that compares your loan amount to the home's value. Lower LTV means more equity and better loan terms.
What It Means
Loan-to-Value ratio (LTV) tells the lender how much of the home's value they're financing versus how much equity you have.
Formula: Loan Amount ÷ Home Value × 100 = LTV%
LTV affects:
- Whether you need PMI (above 80% LTV typically triggers it)
- Your interest rate (lower LTV = better rate)
- Your loan eligibility
As you make payments and/or the home appreciates, your LTV decreases — meaning you're building equity.
Real-World Example
"You buy a $400,000 home with an $80,000 down payment and a $320,000 loan. Your LTV is 80% ($320,000 ÷ $400,000). If the home rises to $440,000, your LTV drops even further."
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Definitions are for educational purposes only and do not constitute financial or legal advice.