LTV Calculator

The one number a lender looks at first

Loan to value is the size of the loan set against the value of the thing securing it, written as a percentage. Borrow 320,000 against a 400,000 house and your LTV is 80 percent.

It matters because it is a measure of the lender's risk rather than yours. If everything goes wrong and the property has to be sold, LTV is what decides whether the sale covers the debt. Which is why it quietly drives so much: whether you are approved, what rate you are offered, and whether you have to pay mortgage insurance every month.

The calculation is a single division. What makes LTV worth a page rather than a sentence is that there are two versions of it, they are measured against different things, and mixing them up is a genuinely expensive mistake. That is what the rest of this is about.

Two modes, and which one you want

The dropdown at the top switches between two questions that look similar and are not.

Purchase is for a house you are buying. You give it the purchase price, your down payment, and any fees being rolled into the loan. It works out the loan amount and the LTV that loan will start life at.

1. Purchase Price. The agreed price of the property.
2. Down Payment. Cash you are putting in yourself.
3. Finance Fees. Charges being added to the loan rather than paid up front. There is a whole section on this below, because it is the field most people have never seen on a calculator before.

Refinance is for a house you already own. Two boxes: what the home is worth now, and what you still owe. It gives you your current loan to value.

1. Home Value. What the property is worth today.
2. Mortgage Balance. The principal still outstanding, which is on your latest statement.

The refinance mode is also the one to reach for any time you simply want a straight loan against value figure with nothing rolled in. Put the loan in the balance box and the price or valuation in the value box, and you have your answer.

The arithmetic behind both

Purchase mode builds the loan first, then divides:

Loan amount = purchase price - down payment + finance fees

LTV = loan amount ÷ purchase price × 100

Refinance mode has nothing to build, so it goes straight to the division:

Current LTV = mortgage balance ÷ home value × 100

Worth sitting on the purchase formula for a second, because the fees sit on the top of the fraction and not the bottom. Money added to your loan raises the numerator while the price stays exactly where it is. So financing a fee does not just cost you the fee. It pushes your LTV up, and LTV is what the lender prices off.

Also notice what is not in either formula. Not your income, not your credit score, not your other debts. LTV is a statement about the property and the loan against it, nothing else. Lenders look at your income separately through debt to income, and the two get judged together.

The finance fees box, and why it moves the answer

Most LTV calculators have two boxes. This one has three, and the third is the interesting one.

Finance fees are charges added to the loan balance instead of being paid in cash at closing. Not every fee works this way. Your appraisal and your title work are normally paid up front and never touch the loan. But several of the big ones are routinely financed, and on government backed loans they are financed by design:

• The FHA upfront mortgage insurance premium.
• The VA funding fee.
• The USDA guarantee fee.
• Origination charges or points, where a lender permits them to be rolled in.

Here is why leaving them out gets you the wrong number. Take a 300,000 home with an FHA loan at the minimum 3.5 percent down.

Your down payment is 10,500, so the base loan is 289,500 and it looks like a 96.5 percent LTV. Then the upfront mortgage insurance premium, at 1.75 percent of that base loan, adds 5,066.25 on top. The loan you actually sign for is 294,566.25.

Which makes your real starting LTV 98.19 percent, not 96.5. Nearly two points of difference, on a loan where every point matters, produced entirely by a fee that never passed through your bank account.

If nothing is being rolled into your loan, use the refinance mode for a clean division instead.

Three worked examples

A conventional purchase. House 400,000, down payment 80,000, and 3,000 of lender fees rolled in.

Loan = 400,000 - 80,000 + 3,000 = 323,000. LTV = 323,000 ÷ 400,000 = 80.75 percent.

That 0.75 is doing real damage. A borrower who thinks they put 20 percent down has actually landed just above the 80 percent line, which is the line mortgage insurance sits on. To genuinely start at 80 percent with those fees financed, the down payment needed to be 83,000. Paying the 3,000 in cash instead of financing it would have done the same job.

The FHA purchase from above. House 300,000, down 10,500, upfront premium 5,066.25 financed.

Loan = 300,000 - 10,500 + 5,066.25 = 294,566.25. LTV = 98.19 percent.

A refinance. Home now valued at 400,000, balance still owing 300,000.

LTV = 300,000 ÷ 400,000 = 75 percent. Comfortably inside the range where conventional refinancing is available without mortgage insurance, and a reasonable position to shop rates from.

Why 80 percent is the number everyone talks about

Eighty percent is not a round number somebody picked for tidiness. In the US it is written into law.

The Homeowners Protection Act gives borrowers two distinct rights over private mortgage insurance:

• You may request cancellation once the balance reaches 80 percent of the property's original value.
• The servicer must automatically terminate it once the balance is first scheduled to reach 78 percent of original value, as long as you are current on payments.

Which is why 80 percent is the threshold that shapes so much behaviour on both sides. Loans above it are what the regulators call high ratio, and mortgage insurance exists to make them possible.

The request right at 80 percent is not automatic in practice. The servicer can ask for evidence that the property has not fallen below its original value, typically an appraisal, and can ask you to pay for that appraisal. They can also require a good payment history. None of which stops it being a right worth exercising, because the gap between the 80 percent date and the 78 percent one is usually the better part of a year of premiums you did not have to pay.

There is a third route as well. Even if the balance has not reached 78 percent, mortgage insurance generally has to end at the midpoint of the loan's amortization period, which is year fifteen of a thirty year term, for a borrower who is current.

Below 80 percent, LTV keeps mattering even though insurance has gone. Lenders price in bands, and moving from 80 to 75 to 60 percent generally improves what you are offered at each step.

The trap: original value is not current value

This is the part worth reading twice, because it catches people in exactly the situation where they think they are winning.

Those statutory thresholds are measured against the property's original value. That means the lower of the contract sales price or the appraised value at the time you bought. If you have refinanced since, it means the appraised value at the refinance.

It does not mean what the house is worth today.

So picture a 400,000 purchase with 10 percent down, and suppose the market has been kind and the house is now worth 500,000. Your balance has come down to 340,000. Against today's value that is a 68 percent LTV, and it feels like mortgage insurance should be long gone. Against the original 400,000 it is 85 percent, and automatic termination is still a few years away.

Appreciation on its own does not trigger the automatic 78 percent termination, because that clock runs on the original amortization schedule and the original value, neither of which knows the market moved.

What appreciation can do is give you a route through your lender's own guidelines, which sit alongside the statutory ones and cannot be less favourable to you than the law. Many investors will consider cancellation based on a fresh appraisal showing a higher value, usually after a minimum period of ownership. That is a conversation with your servicer rather than a right, and it is worth having.

The practical upshot for this calculator: the refinance mode gives you your position against today's market, which is the right number for deciding whether to refinance or whether to ask about cancellation. It is not the number your servicer's automatic clock is running on.

What the refinance mode is actually telling you

Current LTV is the figure a new lender will underwrite you on if you refinance, so it is worth knowing before you start any conversation.

Two inputs, and the soft one is the value. Your balance is a fact printed on a statement. Your home's value is an estimate until an appraiser says otherwise, and the automated numbers on property portals can be some way out in either direction.

So run it twice. Once with an optimistic value and once with a conservative one, and see whether your LTV crosses any threshold between them. If 75 percent and 82 percent are both plausible answers, you have learnt something genuinely useful: the deal you get is going to hang on the appraisal, and it may be worth waiting or preparing for it.

One thing to keep straight. A cash out refinance raises the balance while the value stays put, so it raises your LTV, which is why cash out deals are usually priced above ordinary rate and term refinances and are capped at a lower LTV.

Moving your LTV down

Only two things sit in the fraction, so there are only two levers.

Shrink the loan. A larger down payment on a purchase, or extra principal payments on a loan you already have. On the 80.75 percent example above, another 3,000 down would have brought it to exactly 80 percent. Extra principal payments also count toward the 80 percent cancellation request, since that right can be based on actual payments rather than the schedule, so paying ahead genuinely brings the date forward.

Pay fees in cash rather than financing them. Every unit you roll into the loan lands on the numerator. If you are sitting a fraction above a threshold, this is often the cheapest way back under it.

And then there is the third thing, which is not a lever so much as weather. Value rises over time in most markets, and your LTV against current value falls as it does. Useful for refinancing. As covered above, not useful for the automatic termination clock.

If you want to see the month your balance is scheduled to cross 80 and 78 percent, the mortgage amortization calculator prints the whole schedule with the balance on every row.

Questions people ask

What is a good LTV?

For a US conventional mortgage, 80 percent or below is the level at which private mortgage insurance is not required. Below that, lower is generally better, and lenders tend to price in bands, so 75 and 60 percent usually improve on 80.

What counts as a finance fee?

Anything added to the loan balance rather than paid in cash at closing. The FHA upfront mortgage insurance premium, the VA funding fee, the USDA guarantee fee, and sometimes origination charges or points. Appraisal and title costs are normally paid up front and do not belong here.

What if no fees are being financed?

Use the refinance mode. Enter the loan amount as the balance and the price as the value, and you get a straight loan against value percentage.

My home has gone up in value. Does my PMI come off sooner?

Not automatically. The 78 percent automatic termination runs against the property's original value and the original amortization schedule, so appreciation does not move it. You can still approach your servicer about cancellation based on a new appraisal, which many investors allow, but that is their guideline rather than the statutory right.

What does original value mean?

The lower of the contract sales price or the appraised value at the time you bought the property. If you have refinanced since, it is the appraised value at the time of the refinance.

Does a cash out refinance change my LTV?

Yes, upward, because the balance increases while the value does not. Cash out refinances are generally capped at a lower LTV than ordinary refinances and priced a little higher.

Is LTV the same as debt to income?

No, and lenders use both. LTV compares the loan to the property. Debt to income compares your monthly obligations to your monthly income. One is about the security, the other is about you.

Why is my LTV higher than I calculated?

Almost always financed fees. A 20 percent down payment with 3,000 rolled into the loan produces an LTV of 80.75 percent rather than 80, which on a conventional purchase is the difference between paying mortgage insurance and not.

References

The cancellation and termination thresholds, the definition of original value, the midpoint termination rule, and the point that investor guidelines may not be less favourable to the borrower than the statute all come from the Homeowners Protection Act of 1998 and the Consumer Financial Protection Bureau's guidance and examination material on it. The description of high ratio lending and the function of private mortgage insurance follows the CFPB's supervision procedures.

1. Consumer Financial Protection Bureau (CFPB), When Can I Remove Private Mortgage Insurance (PMI) From My Loan? https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/
2. Consumer Financial Protection Bureau (CFPB), Compliance Bulletin 2015-03: Private Mortgage Insurance Cancellation and Termination, 4 August 2015. https://files.consumerfinance.gov/f/201508_cfpb_compliance-bulletin_private-mortgage-insurance-cancellation-and-termination.pdf
3. Consumer Financial Protection Bureau (CFPB), Homeowners Protection Act (HPA or PMI Cancellation Act) Examination Procedures. https://www.consumerfinance.gov/compliance/supervision-examinations/homeowners-protection-act-hpa-or-pmi-cancellation-act-examination-procedures/
4. Board of Governors of the Federal Reserve System, Background and Summary of the Homeowners Protection Act. https://www.federalreserve.gov/frrs/regulations/background-and-summary-of-the-homeowners-protection-act.htm
5. Consumer Financial Protection Bureau (CFPB), What is PITI? https://www.consumerfinance.gov/ask-cfpb/what-is-piti-en-152/