Loan-to-value (LTV) is the loan amount divided by the appraised (or sometimes purchase) value of the collateral, shown as a percent. A $320,000 mortgage on a $400,000 home is 80% LTV. Higher LTV means less borrower equity and more lender risk if the asset is sold in a downturn - so pricing, approval, and insurance requirements often tighten as LTV rises.
LTV shows up on mortgages, home equity loans/HELOCs, and auto loans - classic secured vs unsecured products. It is a collateral ratio, not a credit score.
The formula
LTV = (loan balance or amount requested ÷ appraised value or purchase price, per lender rules) × 100%
CLTV (combined LTV) adds other liens (first mortgage + HELOC) against the same property. Lenders care about both when you tap equity (When to use a home equity loan vs HELOC).
Values come from appraisals, automated valuation models, or purchase contracts - lenders choose which figure binds.
Where you will see LTV
| Product | Why LTV matters |
|---|---|
| Purchase mortgage | Down payment sets starting LTV; PMI often required above ~80% on many conventional loans |
| Refinance | New loan vs current appraised value |
| HELOC / home equity loan | Max line often capped at a CLTV (for example 80-90%, program-specific) |
| Auto loan | Advance vs book/appraised value; high LTV = little equity, GAP discussions |
| Some credit-union share-secured loans | Cash collateral LTV is usually straightforward |
Down-payment planning: Saving for a home down payment. Auto shopping: How to shop for a used car loan. Always compare APR, term, and fees too (Comparing financing offers).
Worked example: home purchase
Jordan buys a home for $400,000.
| Down payment | Loan | LTV | Rough implication |
|---|---|---|---|
| $80,000 (20%) | $320,000 | 80% | Many conventional programs avoid monthly PMI at ≤80% |
| $40,000 (10%) | $360,000 | 90% | Higher LTV; PMI or other credit enhancement more likely |
| $20,000 (5%) | $380,000 | 95% | Still common with programs, but pricing/PMI differ |
If an appraisal comes in at $390,000 while the contract is $400,000, the lender may size the loan off $390,000. Suddenly a planned 10% down looks like a higher LTV unless Jordan brings more cash. That appraisal gap is why “we’re fine at 90%” is not final until underwriting locks values.
Worked example: used car
Sam wants a used SUV with a $22,000 dealer price. The credit union’s max advance is 110% of wholesale guide value for Sam’s tier. Guide value: $19,000. Max loan toward the car: about $20,900 before taxes/fees rules.
If Sam finances tax, title, and dealer add-ons on top, LTV vs real vehicle value climbs further. That is how buyers become “underwater” on day one. Soft-prequalify and separate price from back-end products (Avoid dealer add-ons).
Why rates and PMI move with LTV
Lenders price risk. Thin equity (high LTV) means a smaller cushion if collateral is sold after default. Mortgage insurers and secondary-market rules (Fannie Mae, Freddie Mac conventions you will hear about from loan officers) institutionalize cutoffs like 80%. Auto lenders use advance rates tied to book value and credit tier.
Lower LTV does not guarantee approval - income, DTI, and credit still matter - but it often improves pricing options and removes PMI when you cross program thresholds.
Checklist
- Compute LTV from loan ÷ lender’s value figure, not a Zillow screenshot alone.
- For HELOCs, ask for max CLTV and whether the appraisal is full or desktop.
- On purchases, plan cash for appraisal gaps.
- On autos, compare loan amount to guide value before saying yes to add-ons. Boat and RV lenders also cap advance rates against collateral guides—see Boat and RV financing.
- Re-run LTV when refinancing or before a cash-out request.
- Pair LTV math with APR/term totals, not monthly payment alone.
Educational only. Not an offer of credit or a mortgage/auto recommendation. LTV caps, PMI rules, and appraisals vary by lender and program. Confirm figures in your Loan Estimate or auto contract.