Loan to value calculator

An 80 percent LTV is a 20 percent equity stake, and the two always sum to 100 because they are shares of the same value. On a $400,000 home that 20 percent is $80,000. Push the loan to $360,000 and equity falls to $40,000, which is 10 percent.

The reason lenders quote the loan side rather than the equity side is that the loan is the number they are exposed to. A borrower reading the same ratio backwards gets the more useful figure: how much of the house is actually theirs.

At purchase, value and price usually match, so LTV is the loan over the price. Later they diverge, and it is the appraised value that goes in the denominator. A rising market lowers LTV without a single extra payment; a falling one raises it the same way.

This is why refinancing conversations often turn on an appraisal. The loan is known to the cent. The value is an opinion, and it is the half of the ratio that moves. How loan to value works covers which value applies when.

Eighty percent is where mortgage insurance usually stops being required, which makes it the threshold most borrowers aim at. The $320,000 loan here sits exactly on it. The $360,000 loan at 90 percent is over the line and would normally carry private mortgage insurance until payments and price growth bring it back.

LTV also sets pricing above and below that line. It is a risk measure for the lender: the lower the ratio, the more the property has to fall before the loan is under water.

LTV compares one debt to one asset at one moment. It is the standard test for mortgage insurance, for refinancing eligibility and for how much can be borrowed against a home, and it pairs with a debt to income ratio, which measures the payment against earnings rather than the balance against the asset. LTV against DTI sets out the difference. This is educational material, not financial advice.