Loan-to-Value (LTV) Ratio

LTV divides the loan amount by the property's value, expressed as a percentage. On a purchase, lenders use the lower of the appraised value and the purchase price, which is why an appraisal that comes in under the contract price raises your LTV and can force a larger down payment.

The 80% line is the one that governs everyday outcomes. Put 20% down and you are at 80% LTV, which is where conventional lenders stop requiring private mortgage insurance. Above it, PMI is added to the payment until the balance falls back — cancellable on request at 80% of the original value, and terminated automatically by the servicer at 78%.

LTV also prices the loan. Lenders apply risk-based adjustments across LTV bands, so the same borrower and the same credit score can see a measurably different rate at 95% than at 75%. Program limits sit on top of that: FHA loans allow up to 96.5% LTV at purchase, most conventional cash-out refinances cap at 80%, and lenders size home equity lines against a combined LTV of roughly 80% to 85%.

Combined LTV, or CLTV, is the version that matters once there is more than one lien. It totals every loan secured by the property — first mortgage plus a HELOC or second — against the same value, and it is the figure a second-lien lender underwrites to.

The ratio moves on its own after closing, from two directions. Every principal payment lowers it, and so does appreciation — but reaching a cancellation threshold through rising home values generally requires a new appraisal and the servicer's agreement, where reaching it by amortization does not.