Loan-to-value ratio (LTV) is your loan amount divided by your home’s value, shown as a percentage. On a purchase, lenders use the lower of the appraised value or the purchase price. Duane Buziak explains that this one number drives your interest rate, whether you pay mortgage insurance, and which loan programs you can use.
Below you’ll find the formula, a worked example, how LTV changes pricing and insurance, the thresholds that matter, and ways to lower your number before you apply. You’ll also see how comparing offers through Free Mortgage Search by Duane Buziak, with a NoTouch Credit Pull soft-pull comparison, shows how LTV changes what you’re offered.
The LTV Formula: Loan Amount Divided by Home Value
The formula is: loan amount ÷ lesser of appraised value or purchase price × 100. On a purchase, the lender uses whichever value is lower. That’s why a low appraisal can change your LTV overnight: if you agree to pay $400,000 and the home appraises at $385,000, the lender measures your loan against $385,000.
A worked example on a $400,000 home
Suppose you buy a $400,000 home that appraises at exactly $400,000.
- 5% down: $20,000 down leaves a $380,000 loan. $380,000 ÷ $400,000 = 0.95, so your LTV is 95%.
- 20% down: $80,000 down leaves a $320,000 loan. $320,000 ÷ $400,000 = 0.80, so your LTV is 80%.
Same house, same price. The only change is how much of it you own on day one, and that single difference changes how a lender sees the file.
Related terms: CLTV and equity
Combined loan-to-value (CLTV) adds every loan secured by the home, including a second mortgage or a home equity line of credit (HELOC), then divides by value. If you owe $240,000 on a first mortgage and have a $30,000 HELOC on a $400,000 home, your CLTV is $270,000 ÷ $400,000 = 67.5%.
Equity is the flip side of LTV. For a refinance with a $240,000 balance on a $400,000 appraisal, LTV is 60% and equity is 40%. Your LTV and your equity percentage always add up to 100%.
The most common mistake
Many people plug an online estimate or the county tax-assessed value into the formula. Neither is what the lender uses. The number that counts is the appraised value (or the purchase price, if lower), so treat online estimates as a rough starting point only.
Why Lenders Care: How LTV Moves Your Rate and Costs
A lower LTV means you have more of your own money in the home, which means less risk if values fall or you can’t keep paying. Lenders and the investors who buy loans respond by adjusting price. In general, the higher your LTV tier, the more a loan costs, either through a higher rate or through fees paid at closing.
Loan-level price adjustments
Many conventional loans are priced with loan-level price adjustments, which are fees or rate changes layered on a base price according to risk factors. LTV is one of the main factors. The grids that set these adjustments live in investor and lender pricing sheets, and they change over time and differ between lenders. Fannie Mae publishes its own matrix on fanniemae.com. As of 2026, it’s worth reading that current matrix directly rather than relying on a figure quoted in an article, including this one.
LTV never works alone
The same LTV can price differently depending on credit score and how you’ll use the property. A 90% LTV with a strong score can cost less than a 90% LTV with a lower score. A second home or investment property is usually priced differently from a primary residence at the same LTV. This is why one generic “rate today” figure tells you very little about your own offer, and why a side-by-side comparison using your real numbers is worth more than a headline rate.
A low rate is not the whole picture
A quoted rate can look attractive while leaving out LTV-driven costs such as pricing adjustments or mortgage insurance. The annual percentage rate (APR) folds many of those costs into one comparable figure. When two offers at the same LTV show different rates, check the APR and the closing costs before deciding which is cheaper.
APR note: any rate or payment figure you see on this site is an illustration, not an offer. Your actual rate and APR depend on your credit profile, LTV, loan type, property, and rate lock period.
LTV Thresholds That Matter: 80%, 95%, 97% and Program Limits
80% and private mortgage insurance
On conventional loans, 80% LTV is the usual line for private mortgage insurance (PMI). Put down less than 20% and you generally pay PMI. Once you own the home, the Homeowners Protection Act of 1998 lets you request PMI removal when your balance reaches 80% of the home’s original value, provided you meet conditions such as a good payment history. PMI must terminate automatically when the balance is scheduled to reach 78% of original value, if you’re current on payments. The Consumer Financial Protection Bureau (CFPB) explains these rules on its website.
High-LTV and cash-out limits
As of 2026, some conventional programs allow as little as 3% down, which means an LTV of 97%. These are limited to eligible borrowers and properties. Cash-out refinances generally carry lower maximum LTVs than purchases, so you can’t usually borrow against all of your equity. Confirm current figures in the Fannie Mae Selling Guide, since limits change.
Loan size and the conforming limit
Loan size relative to value matters too. According to the Federal Housing Finance Agency (FHFA), the 2026 conforming loan limit for a one-unit home is $832,750 in most of the country, rising to a ceiling of $1,249,125 in high-cost areas. Limits vary by county, so check the FHFA lookup for your property. A loan above the limit is a jumbo loan, which usually has its own LTV rules and often requires a larger down payment.
LTV bands on a $400,000 home
| LTV band | Example down payment ($400,000 home) | Loan amount | Typical mortgage insurance implication (conventional) |
|---|---|---|---|
| 97% | $12,000 (3%) | $388,000 | PMI generally required; eligible programs only |
| 95% | $20,000 (5%) | $380,000 | PMI generally required |
| 90% | $40,000 (10%) | $360,000 | PMI generally required, usually at a lower cost |
| 85% | $60,000 (15%) | $340,000 | PMI generally required, usually at a lower cost still |
| 80% | $80,000 (20%) | $320,000 | PMI generally not required |
This table is general guidance, not a quote. Terms vary by lender and borrower profile, and actual APR will differ with credit, loan type, and rate lock period.
How to Lower Your LTV Before You Apply
If you’re buying
There are three levers: put more money down, negotiate the price, or choose a lower-priced home. On the $400,000 example, an extra $20,000 down changes the loan from $380,000 to $360,000, which takes LTV from 95% to 90%. Negotiating the same house down to $380,000 with your original $20,000 down leaves a $360,000 loan and a 94.7% LTV, which is a smaller gain than the extra cash would give you.
If you’re refinancing
You can pay down principal, wait for the home to appreciate, or order an appraisal once you think equity has grown. Keep in mind that an appraisal can come in below what you expected, which would raise your LTV instead of confirming a lower one. A neighborhood’s list prices are not a guarantee of what an appraiser will conclude.
Weigh the cost before you stretch
Don’t drain your emergency savings to hit a threshold. A home with no cash cushion is a risky one. Compare the extra down payment against what it actually saves. Consider this illustration, with made-up numbers: at 95% LTV, PMI costs $140 a month; at 90% LTV, it costs $100 a month. The $20,000 extra down saves $40 a month in insurance. At that rate, insurance savings alone would take 500 months (about 41 years) to repay the $20,000. The extra down payment still lowers your loan balance and your interest cost, but that is the real trade-off to examine, and your actual PMI quote will differ.
No-out-of-pocket closing options exist in some situations, and they are structured differently from a down payment. They affect closing costs, not your LTV, so ask for them to be quoted rather than assumed.
Comparing Offers at Your LTV: One Lender’s Shelf vs. a Broker’s Access
A broker can shop one borrower profile across hundreds of wholesale lenders. A single lender, including a large national direct lender, can offer only its own products and pricing. Neither approach is wrong, but they produce different comparisons. Duane Buziak has been helping buyers find the right mortgage since 2014, and the practical point is that one borrower at one LTV can see offers that differ meaningfully from lender to lender.
| Dimension | Broker with wholesale access | Single lender’s shelf |
|---|---|---|
| Pricing sources | Many wholesale lenders compared for one profile | One company’s own pricing |
| Product range | Programs vary by lender, with more to choose among | Only that lender’s programs |
| Handling of high-LTV or cash-out files | Can look for lenders whose appetite fits the scenario | Limited to that lender’s guidelines |
| Comparing rate, APR and fees | Several offers side by side | One offer to evaluate on its own |
Why quotes diverge at the same LTV
Each lender prices an LTV tier on its own sheet and has its own appetite for certain scenarios, such as 95% purchases or larger cash-out refinances. Two quotes at 90% LTV can differ in rate, fees, and insurance cost, so the same number can lead to different offers.
How the NoTouch Credit Pull works
With NoTouch Credit Pull, you compare options using a soft-pull approach rather than a hard inquiry. A hard pull comes later, and only if you choose to move forward with a loan.
Dare to Compare
If you already have a Loan Estimate, bring it. Duane Buziak’s Dare to Compare approach lines it up against alternatives at the same LTV, loan type, and rate lock period. Then compare APR and total costs, not just the rate, so you see the real difference.
Your LTV Number Is the Starting Point for Every Comparison
LTV is simply your loan divided by your home’s value, and once you know your number you can judge any offer fairly. The next step costs nothing: use the free comparison tool at Free Mortgage Search by Duane Buziak with NoTouch Credit Pull, or bring an existing Loan Estimate for Dare to Compare.
Your dream home is within reach. Start comparing personalized mortgage rates from trusted lenders today and discover the loan solution that fits your budget and goals. Compare rates now and take the first step toward securing your home with expert guidance every step of the way.
