# Loan to Value (LTV) Calculator

You can use this Loan to Value Calculator to calculate the loan-to-value (LTV) and cumulative loan-to-value (CLTV) ratios for your property.

To calculate your LTV rate, simply:

- Choose the right currency (if needed)
- Input an estimate of your property value
- Key in the amount owed on your mortgage(s)
- Press "Calculate LTV" to see the results.

## What is Loan To Value or LTV?

This term is used by the finance industry. It describes the proportion of your home value that your mortgage takes up. So, it shows the value of your first mortgage in percentage terms against your property value.

## How to work out the LTV

This is a simple calculation. Take what you want to borrow (or already owe) and divide by the value of the property. This is best shown by way of an example:

- Property value = $300,000
- Mortgage = $225,000
- LTV = $225,000 divided by $300,000
- LTV = 75%

## When would CLTV come in to play?

If you have more than one mortgage or loan secured on your property, then you may need to consider the Combined Loan To Value or CLTV. This shows your combined debt as a proportion of the value of your home. So, you consider all loans that may be secured on your property.

## Calculating Combined Loan To Value

Now we look at all of the loans secured on a property as a proportion of the overall value of that property. Again, an example brings this to life.

- Property value = $300,000
- First Mortgage = $205,000
- Second Mortgage = $45,000
- Third Mortgage = $20,000
- CLTV = $205,000 plus $45,000 plus $20,000 divided by $300,000
- CLTV = 90%

## Why does your LTV matter?

When it comes to borrowing money against a home, LTV matters a great deal. A lender will look at the LTV as part of the assessment for a mortgage or remortgage. If you have a lower LTV, there is a lower risk to the lender and you will more than likely be offered a lower interest rate – and hence lower monthly payments. If you fail to pay a mortgage, then a lender might have to take the property back and sell it to get their money. If there is more equity (and a lower LTV) then they are more likely to get all of their money back.

Most mortgages where the LTV is over 80% will require PMI or Private Mortgage Insurance to be taken out. This helps the lender as the insurer pays out to mitigate their risk. You will pay a higher interest rate and probably have to pay PMI for a high LTV loan.

The Loan To Value is not the only consideration when a lender decides on mortgage eligibility. They will also look at credit score and housing ratios among others to decide their risk in lending money.

LTV does not stay at the same exact level. If your house price rises or falls, then your LTV will not remain static. As you pay off your mortgage then you lower the LTV with every repayment of the principal. Lenders in a falling market like to build in a buffer and will adjust their acceptable LTV ratio.

## Formulas

The Loan to Value Calculator uses the following formulas:

LTV = Loan Amount / Property Value

*Where,*

**LTV** is the loan to value ratio,

**LA** is the original loan amount,

**PV** is the property value (the lesser of sale price or appraised value).

CLTV = All Loan Amounts / Property Value = ( LA_{1} + LA_{2} + ... + LA_{n} ) / Property Value

*Where,*

**CLTV** is the combined loan to value ratio,

**LA _{1}** is the first loan amount,

**LA _{2}** is the second loan amount,

**PV** is the property value (the lesser of sale price or appraised value).

You may also be interested in our HELOC Payment Calculator (Home Equity Line of Credit Payment Calculator)