What is the Loan-to-Value Ratio?
The Loan-to-Value Ratio is a home equity figure that lenders use to assess risk. The LTC calculator provided insight into how a higher LTV percentage means that the borrower owns less home equity, therefore the loan is riskier to the lender and more costly in case of default. Generally speaking, mortgage applicants with a LTV ratio higher than 80% are required to purchase mortgage insurance to cover increased risk.
How is LTV Calculated?
Mortgage loan-to-value can be calculated several ways, depending on the loan purpose. The easiest way is to use the loan-to-value calculator. This LTV calculator factors in the balance of your first and second mortgages, as well as any other liens on the home.
How to Calculate LTV Yourself
For a home buyers, mortgage loan-to-value is calculated based upon the purchase price. For refinance loans, calculating LTV is based upon the property’s appraised value. By either method, loan-to-value is determined easily by dividing the loan amount by the purchase price or appraised value.
Conventional Loan-to-Value Limits – Home Buyers
Conventional mortgage LTV ratios are based upon the mortgage type, purpose and the number of units in a property.
| Residence Usage | Fixed-Rate Mortgage (FRM) | Adjustable-Rate Mortgage (ARM) |
|---|---|---|
| 1 Unit Primary | 97% LTV | 90% LTV |
| 2 Units Primary | 85% LTV | 75% LTV |
| 3 Units Primary | 75% LTV | 65% LTV |
| 4 Units Primary | 75% LTV | 65% LTV |
| 1 Unit Second Home | 90% LTV | 80% LTV |
| 1 Unit Investment | 85% LTV | 75% LTV |
| 2 Units Investment | 75% LTV | 65% LTV |
| 3 Units Investment | 75% LTV | 65% LTV |
| 4 Units Investment | 75% LTV | 65% LTV |
Conventional Loan-to-Value Limits: Rate-Term Refinance
Rate-term refinance loans typically allow higher loan-to-values than for borrowers trying to take cash out.
| Residence Usage | Fixed-Rate Mortgage (FRM) | Adjustable-Rate Mortgage (ARM) |
|---|---|---|
| 1 Unit Primary | 97% LTV | 90% LTV |
| 2 Units Primary | 85% LTV | 75% LTV |
| 3 Units Primary | 75% LTV | 65% LTV |
| 4 Units Primary | 75% LTV | 65% LTV |
| 1 Unit Second Home | 90% LTV | 80% LTV |
| 1 Unit Investment | 75% LTV | 65% LTV |
| 2 Units Investment | 75% LTV | 65% LTV |
| 3 Units Investment | 75% LTV | 65% LTV |
| 4 Units Investment | 75% LTV | 65% LTV |
Conventional LTV Limits: Cash-Out Refinance
Cash-out refinance mortgages are riskier to lenders, therefore generally employ stricter LTV ratio requirements.
| Residence Usage | Fixed-Rate Mortgage (FRM) | Adjustable-Rate Mortgage (ARM) |
|---|---|---|
| 1 Unit Primary | 80% LTV | 75% LTV |
| 2 Units Primary | 75% LTV | 65% LTV |
| 3 Units Primary | 75% LTV | 65% LTV |
| 4 Units Primary | 75% LTV | 65% LTV |
| 1 Unit Second Home | 75% LTV | 65% LTV |
| 1 Unit Investment | 75% LTV | 65% LTV |
| 2 Units Investment | 70% LTV | 60% LTV |
| 3 Units Investment | 70% LTV | 60% LTV |
| 4 Units Investment | 70% LTV | 60% LTV |
FHA LTV Limits: Purchase or Refinance
FHA home loans permit larger LTV ratios than many mortgage programs. Compare the LTV ratio calculator results with the chart below to determine your standing.
| Credit Score | Purchase Mortgage | Refinance Mortgage |
|---|---|---|
| 580+ FICO Score | 96.5% LTV | 85% LTV |
| Below 580 FICO Score | 90% LTV | 85% LTV |
VA LTV Limits: Purchase or Refinance
It’s really easy to calculate LTV for VA Loans. Technically, there’s no maximum. It’s generally 100 percent of the appraised value though, depending on the fees.
| Purchase Mortgage | Refinance Mortgage | |
|---|---|---|
| All Credit Scores | 100% LTV + Points, Fees | 100% LTV + Points, Fees |
USDA LTV Limits: Purchase or Streamline Refinance
USDA loans are offered with max LTV’s of 102%.
| Purchase Mortgage | Streamline Refinance | |
|---|---|---|
| All Credit Scores | 102% LTV | 102% LTV |
