What is LTV (Loan to Value)?
The loan amount as a percentage of the property or asset value.
LTV = loan ÷ asset value. A 90% LTV means a 10% down payment. Lower LTV (bigger deposit) usually means a lower interest rate and less risk for the lender.
Example
A 4,500,000 loan on a 5,000,000 home is 90% LTV.
How LTV is calculated
Loan-to-value is simply the loan amount divided by the property's value, expressed as a percent. Borrow 800,000 against a 1,000,000 home and your LTV is 80%. The remaining 20% is your equity, usually funded by your down payment.
Why LTV matters
Lenders treat a higher LTV as higher risk, so a 90% LTV loan often carries a higher rate — and in many markets requires mortgage insurance — while a 60–70% LTV can unlock the lender's best rates. Most lenders also cap the maximum LTV they will offer. Lowering your LTV with a bigger down payment is one of the most reliable ways to cut both your rate and your total interest.
Near a regulatory cap, worked out
In the US, a conventional mortgage borrower with a $380,000 loan on a $400,000 home is at 95% LTV — right at the edge many lenders treat as their ceiling for conventional financing. Put down just $20,000 more (to $360,000 borrowed) and LTV drops to 90%, which can unlock a meaningfully better rate and lower mortgage-insurance premium. This is why lenders often quote different rates in LTV "bands" (e.g. ≤80%, 80–90%, 90–95%) rather than a smooth curve — a borrower sitting just above a band boundary can save disproportionately by finding a bit more cash for the down payment.
When LTV falls on its own: PMI cancellation in the US
LTV isn't fixed at closing — it falls over time as you pay down principal (and can rise or fall if the property's value changes). In the US, the Consumer Financial Protection Bureau (CFPB) states that on a conventional mortgage you have the right to request cancellation of private mortgage insurance (PMI) once your balance is scheduled to reach 80% of the home's original value, and your servicer must automatically terminate PMI once the balance reaches 78% — rules that apply to mortgages for single-family principal residences closed on or after 29 July 1999. This is a clear example of a named LTV threshold with a real regulatory basis, and it's worth checking your own loan's servicing rules since specifics vary by country and lender.
A common mistake: confusing LTV with a debt or affordability ratio
LTV measures risk to the collateral — how much of the asset's value is financed — not whether the borrower can afford the payments. A borrower with a low LTV (a large down payment) can still be over-stretched on income, and a borrower with a high LTV can have plenty of income to cover the EMI comfortably. Lenders look at LTV alongside separate affordability checks (income and existing debt ratios) precisely because the two measure different kinds of risk.
FAQ
At what LTV can I remove mortgage insurance?
In the US, on a conventional mortgage, the CFPB states you have the right to ask your servicer to cancel private mortgage insurance (PMI) once your balance is scheduled to reach 80% of the home's original value, and the servicer must automatically terminate PMI at 78% LTV, under rules that apply to mortgages closed on or after 29 July 1999. Rules and thresholds differ by country and lender, so check your own loan documents for the exact figure.
Does a high LTV always mean a higher interest rate?
Usually, but the size of the effect and the exact cutoffs (e.g. 80%, 90%, 95%) vary by lender and loan type. Lenders price LTV in bands rather than a straight line, so crossing one of those thresholds — even by a small amount — can move your rate or mortgage-insurance requirement more than the raw percentage change would suggest.
Sources
- CFPB — When can I remove private mortgage insurance (PMI) from my mortgage? (accessed 26 September 2026)