What is Loan to Value (LTV)? 

Loan to Value is the ratio of the loan amount to the appraised property value or purchase price. Loan to Value (LTV) is an important metric in loan qualifying with different loan types having different LTV requirements. You can typically find LTV's on conventional mortgages (non-government) that go as high as 95%.

Calculate LTV

To calculate LTV, simply divide the loan amount by the appraised value. For a purchase scenario, divide the loan amount by the lesser of appraised value or purchase price.

Examples:

You are refinancing your home and the property appraises for $350,000. You want to take out a $280,000 loan. What is the LTV?

$280,000 / $350,000 = .80 or 80%

You are buying a house for $240,000 and the house appraises for $286,000. Your loan amount is $200,000. What is the LTV? You must take the lesser of the purchase price or appraised value in this scenario.

$200,000 / $240,000 = .83 or 83% LTV

In the second example, if you are choosing a conventional loan, you will likely need private mortgage insurance (PMI) since the LTV is greater than 80%. Read more about private mortgage insurance (PMI).

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