What is a loan-to-value ratio?
The loan-to-value ratio, or LTV, compares the amount you're financing with the appraised value of the property: the loan divided by the value, as a percentage. The bigger your down payment, the lower your LTV. Lenders use it to decide whether to lend to you, how much, and whether you'll need private mortgage insurance or a government-backed loan such as an FHA loan.
It isn't fixed at closing. Payments that go toward principal lower the loan side, and a new appraisal moves the value side.
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Where you’ll see the word
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A rate quote
Higher-risk borrowers, meaning a higher LTV, will usually be offered a higher interest rate, the CFPB says.
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Our equity data
FHFA's shares of mortgages with less than 10% equity and of underwater mortgages apply this ratio across the country.
You might see it called
What the loan-to-value ratio means for you
The 80% line matters most for private mortgage insurance. For a single-family home you live in, with a mortgage that closed on or after July 29, 1999, the CFPB says you have the right to ask your servicer to cancel PMI on the date the principal balance is scheduled to fall to 80% of the original value of your home, or earlier if extra payments have brought the balance down to 80%. The servicer is legally required to grant the request if you make it in writing, you're current with a good payment history, you can certify there are no junior liens such as a second mortgage, and, if evidence is required, you can show the value hasn't declined below the original value.
Three kinds of loan follow other rules. The CFPB says mortgages through the Federal Housing Administration or the Department of Veterans Affairs have different requirements, and that if your lender is paying for the mortgage insurance, different rules apply.
A high ratio costs money up front and every month. The CFPB says private mortgage insurance or a government-backed loan can raise your upfront and monthly costs, and suggests comparing the amounts, terms and costs of several loans, including the cost of mortgage insurance if it will be required.
Questions about the loan-to-value ratio
What happens to the ratio when I refinance?
The value side resets. The CFPB says that if you have refinanced, the original value for the PMI rule is the appraised value at the time you refinanced, not the value when you first bought.
What does a loan-to-value ratio over 100% mean?
The loan is bigger than the appraised value: you'd owe more than the home is worth, which is what underwater means. Our underwater mortgage entry explains the term.
Free help with your mortgage
Housing counselors approved by the U.S. Department of Housing and Urban Development work at nonprofit agencies. The Consumer Financial Protection Bureau describes free foreclosure-avoidance counseling, including help with mortgage-company conversations and available options Source CFPB.
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HUD-approved housing counselors
Our help directory lists 1,010 agencies approved for foreclosure counseling, by state.
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Legal aid
Nonprofit law offices give free civil legal help to people with low incomes. Our help directory lists the 120 offices the Legal Services Corporation funds.
Our pages that use it
- Mortgages with less than 10% equity →The FHFA's share of mortgages with less than 10% equity.
- Underwater mortgages →The FHFA's share of underwater mortgages.
- Housing affordability and mortgage statistics →Prices, payments and down payments in one place.
Related terms
- Home EquityThe difference between a home's current value and the amount owed against it.
- Private Mortgage Insurance (PMI)Insurance that protects a lender if a borrower defaults on a conventional mortgage.
- AppraisalA professional opinion of a property's market value based on its features and comparable sales.
Sources and method
This page uses none of our own data. The definition and the PMI cancellation rule come from the two Consumer Financial Protection Bureau answer pages listed above, opened on Oct 22, 2026.
- Consumer Financial Protection Bureau · What is an interest-only loan? at consumerfinance.gov
- Consumer Financial Protection Bureau · What is a loan-to-value ratio and how does it relate to my costs? at consumerfinance.gov
- Consumer Financial Protection Bureau · When can I remove private mortgage insurance (PMI) from my loan? at consumerfinance.gov
We write with assistance from AI tools. Figures come from the data and sources named on this page.