Loan-to-Value Calculator Formula

Understand the math behind the loan-to-value calculator. Each variable explained with a worked example.

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Formulas Used

Loan-to-Value Ratio

ltv = (loan_amount / appraised_value) * 100

Equity Percentage

equity_pct = (1 - loan_amount / appraised_value) * 100

Equity Amount

equity_amount = appraised_value - loan_amount

Variables

VariableDescriptionDefault
loan_amountLoan Amount(USD)280000
appraised_valueAppraised Property Value(USD)350000

How It Works

Loan-to-Value Ratio Explained

LTV measures how much of the property value is financed, and is a key factor in lending decisions.

Formula

LTV = (Loan Amount / Appraised Value) x 100

LTV Thresholds

  • Below 80%: Typically no PMI required
  • 80-95%: PMI usually required for conventional loans
  • Above 95%: Higher-risk territory, limited loan options
  • Above 100%: Underwater (owe more than property is worth)

    • Worked Example

    A borrower has a $280,000 loan on a property appraised at $350,000.

    loan_amount = 280000appraised_value = 350000
    1. 01LTV = $280,000 / $350,000 = 0.80
    2. 02LTV = 80.00%
    3. 03Equity percentage: 100% - 80% = 20.00%
    4. 04Equity amount: $350,000 - $280,000 = $70,000
    5. 05At 80% LTV, PMI is typically not required

    Frequently Asked Questions

    What LTV do I need to avoid PMI?

    Most conventional lenders require 80% LTV or below to waive private mortgage insurance (PMI). This corresponds to a 20% or larger down payment.

    Can LTV exceed 100%?

    Yes. When you owe more than the property is worth, the LTV exceeds 100% and you are underwater or upside down. This can happen when property values decline after purchase.

    Does LTV affect my interest rate?

    Yes. A lower LTV generally qualifies you for better interest rates because the lender has more collateral relative to the loan. Higher LTV means more risk and typically a higher rate.

    Ready to run the numbers?

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