Home equity vs loan-to-value
Home equity at purchase is price minus the loan. Loan-to-value is the loan over the price. On a $400,000 home with $20,000 down, equity is $20,000 and LTV is 95 percent. They add to 100 percent of original price.
| Home equity at purchase | Loan-to-value | |
|---|---|---|
| Formula | Price minus loan. | Loan / price. |
| 5 percent down | $20,000 on a $400,000 home. | $380,000 loan, 95 percent LTV. PMI $190 a month for 124 months, $23,560 total. |
| 10 percent down | $35,000 on a $350,000 home. | $315,000 loan, 90 percent LTV. PMI $131.25 for 89 months, $11,681.25 total. |
| 20 percent down | $80,000 on a $400,000 home. | $320,000 loan, 80 percent LTV. Months of PMI is 0, total PMI $0. |
| Later | Current value minus remaining balance. | This page's PMI clock still uses original price, not a new appraisal. |
| When you would pick it | How thick the residual is. | Whether the PMI rider is on, and how much of the house is borrowed. |
On this page
They add to 100 percent of original price
5 percent equity and 95 percent LTV are one closing. How home equity works is the residual. How loan-to-value works is the borrowed share. How PMI works is the rider the 80 percent LTV clock turns off.
The PMI calculator prints LTV because that ratio is the switch.
Twenty percent is the off switch, not a rounding
$80,000 down on $400,000 is 80 percent LTV and $0 of PMI. $20,000 down is 95 percent LTV and $23,560 of PMI. The identity did not change. The residual did. This is educational material, not financial advice.
Worked examples
5 percent equity, 95 percent LTV
Home $400,000, down $20,000, 6.5 percent, 30 years, PMI 0.60 percent. Equity and LTV?
- Loan $380,000. Equity $20,000. LTV 95 percent.
- PMI $190 a month for 124 months, $23,560 total. Payment $2,401.86.
Equity is $20,000. The loan is $380,000, LTV 95 percent. PMI is $190 for 124 months, $23,560 total, on a $2,401.86 payment.
10 percent equity, 90 percent LTV
Home $350,000, down $35,000, 6 percent, 30 years, PMI 0.50 percent. Equity and LTV?
- Loan $315,000. Equity $35,000. LTV 90 percent.
- PMI $131.25 for 89 months, $11,681.25 total. Payment $1,888.58.
Equity is $35,000. The loan is $315,000, LTV 90 percent. PMI is $131.25 for 89 months, $11,681.25 total, on a $1,888.58 payment.
20 percent equity, 80 percent LTV
Home $400,000, down $80,000, 6.5 percent, 30 years, PMI 0.60 percent. Equity and LTV?
- Loan $320,000. Equity $80,000. LTV 80 percent.
- Months of PMI is 0. Total PMI is $0.
Equity is $80,000. The loan is $320,000, already 80 percent LTV, so months of PMI is 0 and total PMI is $0.
Common questions
Do they always add to 100 percent?
At purchase, against original price, yes. Later, current-value LTV and remaining-balance equity use a different pair of numbers.
Is 20 percent down required?
It is the conventional PMI off-switch on this page, not a required cheque.
Does a rising price raise equity in the PMI formula?
Not here. The clock uses original price. This is educational material, not financial advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.