Loan-to-value (LTV) ratio is the mortgage loan amount divided by the home's appraised value, expressed as a percentage. The formula is LTV = loan amount ÷ appraised value × 100. So if you borrow $320,000 to buy a $400,000 home, your LTV is 80%. This single percentage drives whether you'll pay private mortgage insurance, the interest rate a lender offers, and even whether the loan is approved at all. Most conventional mortgage programs want LTV at or below 80%, though FHA, VA, and USDA programs accept higher LTVs with mortgage insurance premiums attached. Calculating LTV starts with two numbers you likely already have in mind: the home's price (or appraised value) and the down payment you plan to put down. The loan amount is simply the difference between them, which is exactly the math a mortgage calculator runs in its first step. From there, dividing that loan amount by the home price gives the LTV figure underwriters will use to evaluate the deal.
What Loan-to-Value Ratio Actually Measures
LTV compares what you owe on a property to what the property is worth. The numerator — the loan amount — is the mortgage balance after any down payment is applied. The denominator — the appraised value — is the lender's estimate of the home's market value, usually set by a licensed appraiser at or near the time of purchase or refinance. Because both numbers are expressed in dollars, the ratio is unitless and conventionally shown as a percentage.
Lenders care about LTV because it measures their exposure. A high LTV means the borrower has less skin in the game and the lender is taking on more risk if the borrower defaults. The lower the LTV, the more equity the borrower has built up, which protects the lender's position. That is why the same dollar loan amount can get very different rates depending on the property's value: a $300,000 loan on a $400,000 home is 75% LTV, while the same $300,000 loan on a $350,000 home is roughly 86% LTV and would typically carry a higher rate.
For buyers, LTV also dictates whether private mortgage insurance (PMI) is required. Conventional loans usually require PMI when LTV exceeds 80%, and the premium typically drops off automatically once the loan amortizes below 78% LTV. Government-backed loans carry their own mortgage insurance structures but accept much higher starting LTVs, which is why first-time buyer programs can market "zero down" loans without sounding reckless.
The LTV Formula With a Worked Example
The formula itself is short enough to memorize in one line:
LTV = (loan amount ÷ appraised value) × 100
Because the loan amount is almost always defined as the home price minus the down payment, the same formula can be rewritten as:
LTV = ((home price − down payment) ÷ home price) × 100
Worked example: a home priced at $400,000 with an $80,000 down payment. The loan amount is $400,000 − $80,000 = $320,000. Plugging in:
LTV = ($320,000 ÷ $400,000) × 100 = 0.80 × 100 = 80%
That 80% figure is the threshold most conventional lenders use to decide whether to require PMI. Cutting the down payment to $60,000 raises LTV to 85% — above the threshold, so PMI would typically apply. Raising the down payment to $200,000 drops LTV to 50%, a stronger negotiating position with the lender and a meaningfully smaller monthly bill over the life of the loan.
How to Calculate LTV Using the Mortgage Calculator
The Mortgage Calculator does not display an "LTV" label, but it computes the numerator of LTV the moment you enter two numbers. The loan principal it derives — home price minus down payment — is exactly what you divide by home price to get LTV. Here is the step-by-step process.
- Enter the home price in the first field. Use the purchase price for a new loan or the appraised value for a refinance; the LTV denominator is whichever of those the lender will rely on.
- Enter your planned down payment in the second field. The calculator subtracts this from the home price to produce the loan principal, the numerator of LTV.
- Type your annual interest rate and pick a loan term (15 or 30 years, or enter a custom number of years). These inputs do not change LTV itself, but they determine the monthly payment that LTV indirectly affects.
- Take the loan principal the calculator uses (home price minus down payment) and divide it by the home price using the formula above. For example, $320,000 ÷ $400,000 = 0.80, or 80% LTV.
- If your result is at or below 80% on a conventional loan, you will likely avoid PMI. If it is higher, factor PMI premiums into your planning before committing, since they can add a meaningful percentage to the monthly housing cost.
For a deeper look at how the same four inputs drive your monthly payment and total interest, see Calculate Loan for Home: The Four Numbers That Decide It.
LTV Thresholds by Loan Type
Different mortgage programs treat LTV differently. The table below summarizes the standard maximum LTV at origination for the most common U.S. loan types, and what happens above it.
| Loan program | Maximum LTV at origination | Mortgage insurance requirement |
|---|---|---|
| Conventional conforming | Up to 97% on select programs; 95% common | PMI required above 80%; usually drops at 78% |
| FHA | 96.5% | Upfront plus annual MIP for most LTVs |
| VA | 100% | VA funding fee, often rolled into the loan |
| USDA Rural Development | 100% | Upfront plus annual guarantee fee |
These are conventional starting points used by most lenders; specific conforming loan limits, FICO floors, and reserve requirements can lower the maximum LTV for individual borrowers. If you want to model the payment a given LTV implies, run the home price and down payment through a mortgage calculator and read off the headline figure rather than reverse-engineering the formula.
How LTV Connects to Your Monthly Mortgage Payment
LTV does not appear in the mortgage payment formula, but it shapes every number that does. A larger loan amount — higher LTV — raises the principal P in the amortization formula, which raises the monthly payment. The same home at 95% LTV versus 80% LTV has a meaningfully larger P, and therefore a meaningfully larger monthly principal-and-interest figure for the same rate and term. Lenders also typically charge a higher interest rate on higher-LTV loans because the loan is riskier, which widens the payment gap further. Add mortgage insurance premiums on top, and the monthly housing cost rises again.
This is why anyone shopping for a home usually works backward from the monthly budget. First decide what monthly payment you can afford, then choose a down payment that brings LTV to a level that supports your target rate and avoids PMI on a conventional loan. For a clean view of how principal, rate, and term interact, the amortization section of a mortgage calculator — expandable below the headline payment — shows the year-by-year split between interest and principal repayment, a useful sanity check that the loan is actually paying down as expected.
Finally, remember that LTV changes over the life of the loan as you pay down principal and as the home's value moves. The figure you calculate at closing is your starting LTV, not a permanent one. Recheck it yearly, particularly after any major home improvement that could raise the appraised value, or after several years of payments that have chipped away at the principal balance.
For a deeper look, see Calculate ROI for a Loan-Funded Investment.