LTV (Loan-to-Value)
Loan amount divided by property value, expressed as a percentage. Lower LTV usually means lower rate and easier qualification.
LTV measures how leveraged your home purchase or refinance is. A $400,000 loan on a $500,000 home has 80% LTV. Lenders use LTV to set rate, mortgage insurance requirements, and loan eligibility. Conventional loans require PMI below 80% LTV; FHA caps at 96.5% LTV; VA can go to 100%. Cash-out refinance is typically capped at 80% LTV.
Example
$320,000 loan ÷ $400,000 appraised value = 80% LTV
Related terms
CLTV (Combined Loan-to-Value)
All liens against the property combined, divided by property value. Used when you have a first mortgage plus a HELOC or second.
PMI (Private Mortgage Insurance)
Insurance the borrower pays on conventional loans with less than 20% down, protecting the lender against default loss.
Cash-Out Refinance
Refinancing your existing mortgage into a larger loan and taking the difference in cash. Used to access home equity.
Down Payment
Cash you put toward the home purchase, expressed as a percentage of price. The rest is financed via mortgage.
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