Loan-to-value (LTV)

LTV is your loan as a percentage of the property value. It determines whether you pay mortgage insurance, what interest rate you qualify for, and when PMI falls off.

Updated August 2026

Loan-to-value is the single ratio that shapes most of what you pay on a mortgage. It tells the lender how much skin you have in the game. The higher it is, the more risk they carry — and the more you pay for it, through a higher rate, mortgage insurance, or both.

The formula is simple: LTV = loan ÷ property value × 100. Put 20% down on a $500,000 home and you borrow $400,000, so LTV = 80%. Put 5% down and you borrow $475,000, so LTV = 95%.

Real number examples

Example 1 — 20% down, no PMI

Home price: $500,000. Down payment: $100,000 (20%). Loan: $400,000. LTV = $400,000 ÷ $500,000 = 80%. No PMI. At a 7.00% rate on a 30-year term, the principal-and-interest payment is $2,661/month.

Example 2 — 5% down, PMI applies

Same $500,000 home. Down payment: $25,000 (5%). Loan: $475,000. LTV = 95%. PMI at roughly 0.85% of the loan adds about $336/month. Over the roughly 9 years until you reach 80% LTV at minimum payments, that totals approximately $36,000 in PMI premiums.

Example 3 — When does PMI auto-terminate?

US federal law (the Homeowners Protection Act) requires automatic PMI termination when your scheduled balance reaches 78% of the original purchase price. On the $475,000 loan above, 78% of $500,000 = $390,000. That takes about 11 years at minimum payments. Requesting removal at 80% ($400,000) saves roughly 2 years of PMI — around $8,000.

LTV tiers and what they mean for your rate

Conventional lenders price risk in LTV brackets. Moving from 95% to 90% LTV, or from 90% to 80%, can shave 0.125–0.25% off your rate. On a $400,000 mortgage at 30 years, each 0.125% reduction saves roughly $10,500 in interest over the loan life.

How LTV is used in Canada

Canada uses the same LTV concept but the insurance threshold works differently. CMHC mortgage default insurance is mandatory for any purchase below 20% down (up to a $1.5M purchase price), not optional. There is no equivalent of the US automatic 78% termination — CMHC premiums are a one-time charge added to the mortgage principal at origination.

Frequently asked questions

How do I calculate my LTV?

Divide your loan amount by the appraised property value, then multiply by 100. For example, if you borrow $400,000 on a $500,000 home, your LTV is $400,000 ÷ $500,000 × 100 = 80%. As you make payments and your balance falls, your LTV decreases — assuming property values stay flat.

What LTV do I need to avoid PMI?

In the US, you need an LTV of 80% or below at origination to avoid private mortgage insurance entirely. That means putting at least 20% down. If your LTV is above 80% at closing, PMI is added to your monthly payment until you reach 20% equity (80% LTV), at which point you can request removal. It terminates automatically at 78% LTV under federal law.

How does LTV affect my interest rate?

Lenders price risk through LTV. A borrower at 95% LTV is statistically more likely to default than one at 70% LTV, so lenders charge a higher rate for higher LTV loans — particularly above 80%. Even a half-point difference in LTV tier can shift your rate by 0.125% to 0.25% on a conventional loan. Improving your down payment to hit a lower LTV bracket before locking can save thousands over the life of the loan.

How does LTV change over time?

Your LTV changes for two reasons: your balance falls as you make payments (reducing the numerator), and your property value may rise or fall (changing the denominator). In the early years of a 30-year mortgage most of each payment is interest, so principal — and LTV — barely moves. After about year 10, principal reduction accelerates. If home values rise sharply you can reach 80% LTV faster by requesting a new appraisal.

What is combined LTV (CLTV)?

Combined LTV adds up all liens on a property — your first mortgage, any second mortgage, and any home equity line of credit — then divides by the property value. If you have a $320,000 first mortgage and a $40,000 HELOC on a $500,000 home, your CLTV is 72%. Lenders cap CLTV for refinances and equity products, usually at 80–90%, and PMI calculations on second liens also use CLTV.

Calculate your LTV

Enter your home price and down payment in the calculator — LTV, PMI cost, and the month PMI drops off are all shown automatically.