Definition
LTV is your loan amount divided by the property's appraised value or purchase price. An 80% LTV means you're putting 20% down. Higher LTV means higher risk, so lenders require mortgage insurance above 80%. Lower LTV ratios often get better rates.
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An 80% LTV means the borrower puts down 20%. LTV directly impacts mortgage insurance requirements; loans above 80% LTV typically require PMI or MIP. Lower LTV ratios indicate lower risk and often qualify for better interest rates.
Pro Tip
Getting to 80% LTV eliminates PMI on conventional loans; the savings in insurance often justify saving for an extra down payment.
Example
Buying a $400,000 home with a $320,000 loan has an 80% LTV ($320,000 ÷ $400,000). A $360,000 loan on the same home has a 90% LTV.