Loan-to-Value Ratio (LTV)

The size of your loan compared with the value of the property.

Definition

LTV is the loan balance divided by the property's value, expressed as a percentage. Lenders use it to gauge risk: a lower LTV (more equity) means better rates and no PMI, while a high LTV signals more risk. Reaching 80% LTV is the common threshold for dropping PMI.

Example

A $320,000 loan on a $400,000 home is an 80% LTV.

Related terms

Private Mortgage Insurance (PMI)
Insurance lenders require when your down payment is under 20%, protecting them if you default.
Down Payment
The upfront cash you pay toward a home, with the rest financed by a mortgage.
Home Equity
The portion of your home you truly own — its value minus what you still owe.

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