What LTV do I need to avoid PMI?

On a conventional loan you avoid private mortgage insurance by keeping LTV at or below 80%, which means putting at least 20% down on a purchase. PMI is required above 80% and, by federal law, automatically cancels when the loan reaches 78% of the original value.

How do I calculate my LTV ratio?

Divide your loan amount by the appraised value, then multiply by 100. A $400,000 loan on a $500,000 home is $400,000 / $500,000 = 0.80, or 80% LTV. On a purchase, lenders use the lower of the appraised value or the purchase price.

What is the maximum LTV for a conventional loan?

Standard conventional purchase programs allow up to 97% LTV, meaning as little as 3% down. Conventional cash-out refinances are capped near 80% LTV. FHA reaches 96.5%, while VA and USDA can go to 100% for eligible borrowers.

What is the difference between LTV and CLTV?

LTV counts only the first mortgage against the home's value. CLTV, or combined loan-to-value, adds all liens together, including second mortgages and HELOC balances, then divides by the appraised value. Programs with a second lien are underwritten to CLTV.

Does a higher appraisal lower my LTV?

Yes on a refinance, where the appraised value is the only figure used, so a higher appraisal reduces LTV and can help you drop mortgage insurance. On a purchase, lenders use the lower of the appraisal or the sale price, so a high appraisal does not reduce your LTV below what the price supports.

Guides · 7 min read

Loan-to-Value (LTV) Ratio, Explained

By Mike Basti·August 18, 2026

Loan-to-value (LTV) is your loan amount divided by your home's appraised value, expressed as a percentage. Borrow $400,000 against a $500,000 home and your LTV is 80%. Lenders use this single number to decide whether you qualify, what rate you pay, and whether mortgage insurance is required.

What LTV is and how the formula works

LTV measures how much of a property's value is financed with debt. The formula is simple: LTV = loan amount / appraised value. The lower the ratio, the more equity you hold and the less risk the lender carries.

Two details matter in California. First, lenders use the lower of the purchase price or the appraised value on a purchase, so an appraisal that comes in under contract can push your LTV higher than you planned. Second, on a refinance the appraised value is the only figure that counts, since there is no sale price to compare against.

A related figure, the loan-to-cost ratio, appears on construction and renovation loans, but for standard purchases and refinances LTV is the number that drives every pricing decision.

How to calculate LTV: a worked example

Assume you are buying a condo in Newport Beach for $750,000 and putting $112,500 down. Your loan amount is $637,500. The appraisal comes back at $750,000, matching the contract price.

LTV = $637,500 / $750,000 = 0.85, or 85%.

Now suppose the appraisal lands at $725,000 instead. The lender uses the lower figure, so your down payment stays the same but the ratio changes: $637,500 / $725,000 = 0.879, or roughly 88%. That five-thousandths-of-a-point shift can move you into a higher mortgage insurance tier and a slightly worse rate. To hold your original 85% LTV against the lower value, you would need to bring an extra $21,250 to closing or renegotiate the price.

Maximum LTV by loan type

Each loan program caps how high your LTV can go. The table below shows standard maximums for California borrowers in 2026. Higher LTV usually means a smaller down payment but stricter overlays and, in most cases, mortgage insurance.

Loan type	Max LTV (purchase)	Down payment	Mortgage insurance
Conventional (Fannie/Freddie)	97%	3%	PMI until 80% LTV
FHA	96.5%	3.5%	MIP, often for loan life
VA (eligible veterans)	100%	0%	None (funding fee applies)
USDA (rural areas)	100%	0%	Guarantee fee applies
Conventional cash-out refi	80%	n/a	None at or below 80%
FHA cash-out refi	80%	n/a	MIP applies

Jumbo loans, common across coastal California, often cap LTV at 80% to 90% depending on the lender and loan size. As a broker, Save Financial compares these caps across multiple wholesale lenders rather than being limited to one bank's guidelines.

Why LTV matters: PMI, pricing, and approval

LTV controls three things that hit your wallet directly.

Mortgage insurance. On a conventional loan, private mortgage insurance (PMI) is required whenever your LTV exceeds 80%. Under the federal Homeowners Protection Act, your servicer must automatically cancel PMI once the loan is scheduled to reach 78% LTV based on the original amortization, and you can request cancellation at 80%. FHA mortgage insurance is different and often lasts the life of the loan unless you refinance.

Rate pricing. Conventional pricing moves in LTV tiers, typically at 60%, 70%, 75%, 80%, 85%, 90%, and 95%. A borrower at 79% LTV frequently prices better than one at 81%, so shaving a fraction of a point can lower your rate.

Approval. Exceed a program's maximum LTV and the loan simply cannot be delivered. LTV also interacts with credit score and debt-to-income ratio, so a high LTV leaves less room for weakness elsewhere in the file.

CLTV: what changes with a second lien

When more than one loan is secured by the same property, lenders look at combined loan-to-value (CLTV). The formula adds every lien together: CLTV = (first mortgage + second mortgage + any HELOC balance) / appraised value.

Example: a $500,000 home carries a $350,000 first mortgage and a $50,000 home equity line. The first-lien LTV is 70%, but the CLTV is ($350,000 + $50,000) / $500,000 = 80%. Piggyback structures and HELOCs are underwritten to CLTV, and many programs allow CLTV up to 90% or higher even when the first-lien LTV is lower. A related figure, HCLTV, counts the full available credit line rather than the drawn balance.

If you are adding a HELOC or second mortgage in California, the CLTV cap, not the first-lien LTV, usually determines how much you can borrow.

How to lower your LTV

A lower LTV widens your options and cuts your cost. Practical ways to get there:

Increase your down payment. Every extra dollar down reduces the loan amount and the ratio. Crossing an 80% threshold eliminates PMI on conventional financing.
Pay down principal before refinancing. On a refinance, a smaller balance against a stable value lowers LTV directly.
Let appreciation work. In many California markets, rising values raise the denominator. A borrower who bought at 90% LTV may reach 80% through appreciation alone, opening the door to drop PMI.
Order a new appraisal. If you have made improvements or the market has moved, a fresh valuation can document a lower LTV and support PMI removal.
Make extra principal payments. Recurring additional payments accelerate the drop toward the 80% and 78% cancellation points.

The bottom line

LTV is the ratio of your loan to your home's value, and it decides your down payment, your rate tier, and whether you pay mortgage insurance. Conventional financing reaches 97% LTV, FHA 96.5%, VA and USDA up to 100%, and cash-out refinances typically cap near 80%. Keep the first-lien LTV at or below 80% to avoid PMI, and watch CLTV whenever a second lien is involved. Because caps and pricing vary by lender, a California broker can shop your exact LTV across several wholesale investors. Save Financial (NMLS #377740, DRE #01875766) works with borrowers in Newport Beach and Marina del Rey to structure loans around the LTV thresholds that save the most money.

About this article: Save Financial is a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) with offices in Newport Beach and Marina del Rey, serving all 58 counties. We shop multiple lenders to match you with the right program. For a real quote, apply online or call 949-379-5320.