Sarah has 15 years of experience in residential lending, specializing in risk assessment and LTV compliance for major mortgage providers.
Use the **Loan-to-Value Ratio Calculator** to assess the risk of a mortgage loan. The LTV Ratio (Q) is calculated by dividing the Loan Amount (V) by the Fair Market Value (F) of the home, helping you determine your eligibility for the best interest rates. Enter any three of the four key variables (LTV Ratio, Loan Amount, Market Value, or Equity) to solve for the missing one.
Loan-to-Value Ratio Calculator
Calculate LTV, maximum loan amount, or home value based on current data.
Loan-to-Value Formulas
The LTV ratio is a percentage that compares the amount of the loan to the market value of the property. The LTV is the basis for lender risk assessment.
Solve for LTV Ratio (%) (Q):
Q = [ V / F ] × 100
Solve for Loan Amount ($) (V):
V = F × [ Q / 100 ]
Solve for Fair Market Value ($) (F):
F = V / [ Q / 100 ]
Solve for Home Equity ($) (P):
P = F – V
Formula Source: Investopedia: Loan-to-Value Ratio
Variables Explained
- F (Fair Market Value): The appraised value of the home ($). This is the denominator for LTV.
- V (Loan Amount): The total outstanding principal balance of the mortgage ($). This is the numerator for LTV.
- Q (LTV Ratio): The ratio of the loan to the value, expressed as a percentage (%).
- P (Home Equity): The portion of the home’s value that the homeowner actually owns (F – V).
Related Calculators
Determine how LTV impacts your total home purchase cost:
- PMI (Private Mortgage Insurance) Calculator (LTV > 80%)
- Down Payment Calculator (The inverse of LTV)
- Mortgage Payment Calculator (LTV affects the interest rate)
- Home Equity Calculator (Track the growth of your P value)
What is the Loan-to-Value Ratio?
The Loan-to-Value (LTV) ratio is a financial assessment tool used by lenders to evaluate the amount of risk they are assuming with a loan. It compares the amount of the loan you are seeking or currently hold against the appraised value of the property. The lower the LTV ratio, the lower the risk for the lender, which usually results in better interest rates for the borrower.
For example, if a home is appraised at \$400,000 and the borrower takes out a loan of \$300,000, the LTV ratio is 75% (\$300,000 / \$400,000). If the LTV is above 80% (meaning the down payment was less than 20%), lenders often require the borrower to pay Private Mortgage Insurance (PMI) to offset the increased risk.
How to Calculate LTV Ratio (Example)
Let’s find the **LTV Ratio (Q)** for a \$280,000 loan (V) on a home appraised at \$350,000 (F).
- Apply the Ratio Formula:
Q (decimal) = Loan Amount (V) / Fair Market Value (F) = \$280,000 / \$350,000
- Calculate Decimal Result:
Q (decimal) = $\mathbf{0.80}$
- Convert to Percentage:
Q = 0.80 × 100
- Final Result:
The LTV Ratio (Q) is $\mathbf{80\%}$.
Frequently Asked Questions (FAQ)
What is considered a good LTV ratio?
An LTV ratio of 80% or lower is generally considered excellent, as it typically avoids PMI and qualifies the borrower for the most competitive interest rates.
How is LTV different from the Down Payment Percentage?
They are inverses. If the Down Payment Percentage is 20%, the remaining percentage financed (the LTV) is 80% (100% – 20%). The LTV focuses on the bank’s risk exposure.
Does LTV change over time?
Yes. As you pay down your loan (decreasing V) or as the market value of your home increases (increasing F), your LTV ratio decreases, increasing your home equity (P).
What is the maximum LTV ratio allowed?
This varies by lender and loan type, but many conventional loans cap LTV at 95% or 97%. Government-backed loans (like VA) can allow up to 100% LTV for qualified borrowers.