What Is a Loan-to-Value Ratio?

Q: Can I refinance with a high LTV?

Yes. FHA Streamline and VA IRRRL refinances have no LTV ceiling because they require no new appraisal in most cases. Fannie Mae's high-LTV refinance options exist for borrowers above 97%. What high LTV limits is cash-out refinancing, which conventional lenders generally cap at 80%, and VA allows up to 90%.

Written by Samantha SheltonNMLS 1647301Updated October 2026

Couple in front of a ranch home considering how their loan-to-value ratio affects their mortgage

Your loan-to-value ratio is the loan amount divided by the property’s value, written as a percentage. Borrow $450,000 on a $500,000 home and your LTV is 90%.¹ That one number decides whether you pay mortgage insurance: on a conventional loan you have the right to ask your servicer to cancel private mortgage insurance when the balance is scheduled to fall to 80% of the home’s original value, and federal law makes the servicer terminate it automatically at 78%.

Learn how to calculate LTV in one step, which value belongs in the denominator, and how the ratio changes what you pay. If you’re still getting oriented, start with our mortgage basics guide.

Key takeaways:

The math is one step: Divide the loan amount by the property value and multiply by 100. A $450,000 loan on a $500,000 home is a 90% LTV.
80% is the line that costs money: Above 80% LTV a conventional loan carries mortgage insurance. You can request cancellation at 80% of original value, and your servicer must terminate it at 78%.
The denominator is the lesser of two numbers: On a purchase, Fannie Mae uses the lower of the sales price or the appraised value. A $490,000 appraisal on a $500,000 contract pushes a $450,000 loan from 90% to 92%.

What is a loan-to-value ratio?

A loan-to-value ratio is the percentage of a property’s value that you are financing. At 90% LTV the lender puts up 90 cents of every dollar the house is worth and you put up the other 10. The flip side is equity: 90% LTV means 10% equity.

Lenders think in LTV because it measures their exposure, not yours. That equity is the cushion that absorbs a price drop, the selling costs, and the missed payments if a loan goes bad. It also scales, which is why nearly every rule in lending is written as an LTV threshold. For the other terms sitting beside it on your approval, see our mortgage terminology reference, and Investopedia offers a detailed definition of the loan-to-value ratio in general lending terms.

How do you calculate your LTV ratio?

Divide the loan amount by the property value, then multiply by 100. A $450,000 loan on a $500,000 home is 0.90, or 90%. Fannie Mae’s Selling Guide adds a wrinkle: lenders truncate to two decimal places, then round up to the nearest whole percent, so a computed 91.8367% is delivered as 92%.

The denominator is where borrowers get surprised. Fannie Mae uses the lower of the sales price or the current appraised value on a purchase, and the current appraised value on a refinance, which makes appreciation powerful on a refinance and irrelevant on a purchase.

A low appraisal raises your LTV: Agree to pay $500,000, plan on a $450,000 loan, and the appraisal lands at $490,000, and your LTV jumps from 90% to 92%.
A high appraisal does not lower it: If that house appraises at $520,000, the $500,000 contract price still governs. Instant equity is real, but it doesn’t improve your terms.

Your original LTV is fixed at closing; your current LTV uses today’s balance and falls every month you pay principal. When that number decides whether you can drop mortgage insurance, use a real valuation, not an online estimate. Our walkthrough of the home appraisal process explains what the appraiser does.

Why does your LTV ratio matter?

Because four decisions get made off that one percentage: whether you’re approved, what you’re charged, whether you owe mortgage insurance, and how much equity you can borrow later.

LTV band	Conventional mortgage insurance	Programs that reach it	What it means for you
80% or below	Not required	Conventional, jumbo, cash-out refinance	No premium, the best pricing tier, the widest lender choice.
80.01% – 90%	Required	Conventional, FHA, VA, USDA	A premium rides on your payment until you reach the cancellation thresholds.
90.01% – 96.5%	Required, at higher coverage	Conventional, FHA, VA, USDA	Required coverage steps up, so the premium climbs with the ratio.
96.51% – 100%	Required, to a 97% ceiling	Conventional 97% programs, VA, USDA	Conventional stops at 97%. Above that, VA and USDA are the paths.

Pricing is the part borrowers underestimate. Lenders quote in LTV tiers, so moving from 90% to 80% can change both the rate and the insurance on the same house with the same credit score. LTV never touches the rest of your payment, though: taxes and insurance run through your escrow account at any ratio. And LTV is only half the file; the other half is your debt-to-income ratio.

When does LTV get rid of your mortgage insurance?

At 80% on request and at 78% automatically, both measured against the home’s original value. The Consumer Financial Protection Bureau describes three separate protections, and they are not interchangeable.

Request cancellation at 80%: You have the right to ask your servicer to cancel PMI on the date the balance is scheduled to fall to 80% of your home’s original value. Asking is on you, and you need to be current on your payments for it to happen on that date.
Automatic termination at 78%: Your servicer must terminate PMI on its own when the balance is scheduled to reach 78% of original value. The same condition applies: if you are behind, termination waits until your payments are brought up to date.
Midpoint backstop: If neither has happened, your servicer must end PMI the month after you reach the midpoint of the loan’s amortization schedule, which is 15 years into a 30-year loan.

Note the word running through all three: original value. Appreciation does not trigger these rights, which is why some homeowners refinance instead of waiting. The CFPB explains what private mortgage insurance is and when lenders require it, our guide to mortgage insurance covers the cost, and refinancing to remove mortgage insurance runs the break-even math. All of this governs PMI on conventional loans; FHA premiums follow HUD’s rules and generally do not cancel at an LTV threshold.²

What are the maximum LTV limits by loan program?

They run from 97% on a conventional loan to 100% on VA and USDA financing, and each program writes the rule differently.

Conventional

Conventional loans reach 97% LTV, with mortgage insurance required above 80%. Fannie Mae’s coverage table starts at the 80.01% – 85.00% band and runs through 95.01% – 97.00%, marking where the insurance requirement begins and where conventional financing stops. As a broker we price the same 3%-down scenario across multiple wholesale lenders, where the premium often differs most.

FHA

FHA purchase loans go to 96.5% LTV, and your credit score decides whether you get there. HUD’s Single Family Housing Policy Handbook 4000.1 sets the maximum LTV for purchase transactions at 96.5% of the Adjusted Value, then splits eligibility: a minimum decision credit score at or above 580 is eligible for maximum financing, while 500 to 579 is limited to a maximum LTV of 90%.³

VA

VA-backed purchase loans require no down payment as long as the sales price isn’t higher than the home’s appraised value, a 100% ceiling written as a sentence instead of a percentage. VA also confirms there is no need for private mortgage insurance or mortgage insurance premiums. On a VA cash-out refinance, federal regulation caps the new loan at 100% of the property’s reasonable value, so VA will not guaranty one above a 100% LTV; an Interest Rate Reduction Refinance Loan runs under a separate rule that limits the loan to the balance being refinanced plus allowable costs.⁴

USDA

USDA guaranteed loans also reach 100% of value, written into federal regulation as a lesser-of test. Under 7 CFR 3555.103, the loan cannot exceed the lesser of the appraised market value plus the upfront guarantee fee, or the purchase price plus eligible acquisition costs. Many retail banks skip USDA; as a broker we place it through partner lenders.

What is the difference between LTV and CLTV?

LTV counts one loan, CLTV counts every lien. Fannie Mae calculates the combined loan-to-value ratio by adding the first mortgage’s original loan amount, the drawn portion of any HELOC, and the unpaid balance of all closed-end subordinate financing, then dividing by the lesser of the sales price or the appraised value.

Run it on a $300,000 home carrying a $200,000 first mortgage and a $40,000 drawn HELOC. The LTV is 67%, which looks comfortable. The CLTV is 80%, which is what the lender actually underwrites. A HELOC you opened and forgot about is a common reason a refinance comes back tighter than expected, especially on cash-out refinances.

How do you lower your LTV ratio?

Four levers move it, and only two are available on closing day.

Put more down: The only instant lever. Twenty percent down on a $500,000 home is $100,000, producing a $400,000 loan, an 80% LTV, and no mortgage insurance. Our guide to how to save for a down payment covers where that money comes from.
Buy at or below appraised value: Because the denominator is the lesser of price and appraisal, negotiating down shrinks the loan and the ratio at once.
Pay down principal: Amortization does this on its own, slowly at first. Extra principal payments reach the 80% and 78% thresholds ahead of schedule.
Let appreciation work, then document it: Rising values lower your current LTV on their own, but no lender acts until a new valuation exists. The FHFA House Price Index data on home value changes shows what markets have actually done.

What you should not do is chase a lower LTV into a worse loan. Draining your savings to reach 80% can leave you short of the reserves an underwriter expects.

How Align explains it

Every term on this page shows up on your Loan Estimate. Samantha goes through yours line by line before you sign anything, and she keeps explaining until it makes sense.

Already have a Loan Estimate from another lender? Bring it to us. We will compare it line by line and show you where we can do better.

You are working with a small, owner-run brokerage in Waterford: no call center, and no layers of management between you and the person doing your loan.

Look up a term in the mortgage glossary

FAQ: Loan-to-value ratio

Here are answers to common questions about loan-to-value ratios.

What is a good loan-to-value ratio?

80% or lower is the benchmark. At or below 80% you avoid private mortgage insurance on a conventional loan and qualify for better pricing. Between 80% and 97% you still qualify, but you pay mortgage insurance. Government programs go higher: FHA allows 96.5%, and VA and USDA reach 100% of value. Our guide to mortgage insurance shows what each band costs.

How do I calculate my current LTV?

Divide your remaining loan balance by the home’s current market value, then multiply by 100. A $240,000 balance on a home now worth $340,000 is about 70.6%, which a lender rounds up to 71%. If the number matters for cancelling mortgage insurance or qualifying for a refinance, use a recent appraisal, not an online estimate; the home appraisal is what your lender acts on.

When do lenders use CLTV instead of LTV?

LTV counts only your first mortgage against the property value. CLTV, or combined loan-to-value, adds every lien secured by the home, including a home equity loan or HELOC. A $200,000 first mortgage plus a $40,000 drawn HELOC on a $300,000 home is 67% LTV but 80% CLTV. Lenders use CLTV whenever a second lien exists, reading it alongside your debt-to-income ratio.

Can I refinance with a high LTV?

Yes, but your options narrow. FHA’s non-credit-qualifying Streamline Refinance is exempt from HUD’s appraisal-ordering requirements, and VA’s IRRRL refinances an existing VA loan into better terms. Fannie Mae’s high LTV refinance option is still in its Selling Guide, but acquisitions are paused, so treat it as unavailable. What a high ratio really limits is cash-out refinancing, where lenders in Align’s network generally cap conventional borrowers around 80% LTV.

The bottom line on loan-to-value ratio

Your loan-to-value ratio is the loan amount divided by the property’s value: $450,000 on a $500,000 home is 90%. It is the number lenders price from, and 80% is the line that matters most, because that’s where conventional mortgage insurance stops being required and the better pricing tiers begin. Federal law adds automatic termination at 78% of original value. Programs stretch the ceiling to 96.5% on FHA and 100% on VA and USDA, but the cheapest money sits at the lowest ratios.

If you’re ready to see where your LTV lands and what it’s costing you, talk to Align Lending. We’ll shop your scenario across our lender network and show you the pricing side by side. Call 248-506-5727 or start online today.

Footnotes:

1. Example figures in this article are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Your loan-to-value ratio, program eligibility, and terms will depend on your application, your appraisal, and market conditions. Return to text.

2. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA mortgage insurance premium rules are set by HUD and are subject to change; confirm the terms that apply to your specific loan. Return to text.

3. FHA loan-to-value maximums and minimum decision credit score tiers are set by HUD in the Single Family Housing Policy Handbook 4000.1 and are subject to change. Individual lenders may apply stricter overlays than the published maximums. Return to text.

4. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. VA loan-to-value and refinance requirements are set by VA and are subject to change. Return to text.

Sources: LTV ratio calculation, the requirement to truncate the result to two decimal places and round up to the nearest whole percent, the use of the lower of the sales price or the current appraised value on a purchase and the current appraised value on a refinance, Fannie Mae Selling Guide B2-1.2-01. Combined loan-to-value ratio as the first mortgage’s original loan amount plus the drawn portion of a HELOC plus the unpaid principal balance of closed-end subordinate financing, divided by the lesser of sales price or appraised value, Fannie Mae Selling Guide B2-1.2-02. Standard mortgage insurance coverage bands running from 80.01% – 85.00% through 95.01% – 97.00%, Fannie Mae Selling Guide B7-1-02. Status of the high LTV refinance option, Fannie Mae Selling Guide B5-7-01. Borrower-requested PMI cancellation at 80% of original value, automatic termination at 78%, final termination the month after the midpoint of the amortization schedule, the requirement that the borrower be current, and the definition of original value as the lower of the contract sales price or the appraised value at purchase, Homeowners Protection Act; Consumer Financial Protection Bureau, Ask CFPB (When can I remove private mortgage insurance from my loan?). Maximum LTV of 96.5% of Adjusted Value on FHA purchase transactions, minimum decision credit score at or above 580 eligible for maximum financing and 500 to 579 limited to a 90% maximum LTV, and the non-credit-qualifying Streamline Refinance exemption from the appraisal-ordering sections, HUD Single Family Housing Policy Handbook 4000.1. No down payment when the sales price is not higher than the appraised value and no private mortgage insurance or mortgage insurance premium on VA-backed purchase loans, U.S. Department of Veterans Affairs. New loan amount on a VA refinance of mortgage or other lien indebtedness limited to 100% of the reasonable value, 38 CFR § 36.4306(a)(1); interest rate reduction refinancing loan amount limits, 38 CFR § 36.4307. USDA guaranteed loan limited to the lesser of the appraised market value plus the upfront guarantee fee or the purchase price plus eligible acquisition costs, 7 CFR § 3555.103. House price change data, Federal Housing Finance Agency House Price Index. Loan-to-value and combined loan-to-value examples are calculated by Align Lending from the figures shown.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Program rules, agency loan-to-value maximums, mortgage insurance requirements and lender overlays change and vary by program, property and lender; confirm the limits that apply to your file with your Loan Estimate and your loan officer, and consult a qualified professional about your situation. Figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.