Loan-to-Value (LTV) Ratio Calculator

Calculate the loan-to-value (LTV) ratio of your mortgage to assess loan risk and determine your home’s equity. This key financial metric helps lenders evaluate the risk of your loan and impacts borrowing costs.

Property Details
Current Loan Balance
Remaining mortgage balance (e.g., $140,000)
Current Appraised Value
Current market value of the property (e.g., $400,000)
Please enter a valid positive appraised value to calculate the LTV ratio.
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Step by Step
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Result

0% 80% Low 90% Moderate 100% High

Detailed Steps

Visual Representation

Formula

Loan-to-Value (LTV) Ratio Definition

The LTV ratio is calculated by dividing the current loan balance by the property’s current appraised value, then multiplying by 100 to express it as a percentage:

LTV = (Current Loan Balance ÷ Current Appraised Value) × 100%

Home Equity Definition

Home equity is calculated by subtracting the current loan balance from the property’s current appraised value:

Equity = Current Appraised Value − Current Loan Balance

Interpretation

  • LTV ≤ 80%: Low – The loan is low risk for lenders, often qualifying for better rates and no PMI.
  • LTV 80%–90%: Moderate – The loan carries moderate risk, possibly requiring PMI or higher rates.
  • LTV > 90%: High – The loan is high risk, likely increasing borrowing costs and requiring PMI.

How to Use the Loan-to-Value (LTV) Ratio Calculator

  1. Enter the current loan balance of your mortgage in the “Property Details” section (e.g., $140,000).
  2. Enter the current appraised value of your property (e.g., $400,000).
  3. Click the “Calculate” button to determine the LTV ratio and home equity.
  4. View your results in your chosen display format, showing the LTV percentage and risk level.

Frequently Asked Questions (FAQs)

What is the loan-to-value (LTV) ratio?

The loan-to-value (LTV) ratio is a financial metric that compares the current loan balance of a mortgage to the property’s current appraised value, expressed as a percentage. It helps lenders assess the risk of a loan.

How do you calculate the loan-to-value ratio?

To calculate the LTV ratio:

  1. Determine the current loan balance (e.g., $140,000).
  2. Obtain the current appraised value of the property (e.g., $400,000).
  3. Divide the loan balance by the appraised value.
  4. Multiply the result by 100 to get the percentage.

Example: LTV = (140,000 ÷ 400,000) × 100 = 35%.

What is the formula for calculating LTV?

The formula for calculating the LTV ratio is:

LTV = (Current Loan Balance ÷ Current Appraised Value) × 100%

This measures the proportion of the property’s value that is financed by the loan.

What is home equity, and how is it calculated?

Home equity is the portion of the property’s value that you own outright. It is calculated by subtracting the current loan balance from the current appraised value:

Equity = Current Appraised Value − Current Loan Balance

Example: For a $400,000 property with a $140,000 loan, equity = 400,000 − 140,000 = $260,000.

What is a good LTV ratio?

A good LTV ratio depends on lending standards:

  • ≤80%: Low risk, often qualifying for better rates and no private mortgage insurance (PMI).
  • 80%–90%: Moderate risk, may require PMI or higher interest rates.
  • >90%: High risk, typically increasing borrowing costs and requiring PMI.

Why is the LTV ratio important?

The LTV ratio is important because:

  • It determines loan approval and interest rates.
  • Lower LTV ratios often qualify for better terms and lower costs.
  • It indicates the risk level for lenders, affecting PMI requirements.
  • It helps homeowners understand their equity and borrowing potential.