Loan-to-Value Calculator

The loan-to-value ratio measures the amount of the mortgage relative to the value of the property. LTV is one of the factors lenders use to evaluate mortgage borrowers. LTV requirements vary based on loan type, but in general a lower LTV could help you get quoted a lower mortgage rate. LTV is generally expressed as a percentage.

» MORE: What is LTV?

How do I calculate my LTV?

Loan-to-value ratio is derived from the loan amount divided by the value of the property. LTV is usually expressed as a percentage, so you have to multiply your answer by 100 to get the LTV.

For example, say you're looking to buy a $350,000 home, and you've got $28,000 for a down payment. Subtract the down payment amount from the cost of the home to get the loan amount: $350,000 - $28,000 = $322,000.

Now, divide the loan amount by the cost: $322,000 / $350,000 = 0.92

Multiply by 100 to get the LTV, which is 92%.

Or you can use our LTV calculator and simply plug in your numbers, no math required.

» Buying a car? Here's how LTV works for vehicle purchases

How lenders use loan-to-value

Lenders evaluate your total financial picture when you're applying for a mortgage, but calculations like loan-to-value ratio provide shortcuts.

The amount you want to borrow compared to the value of the property is how much the lender would be putting on the line. The lender weighs this against other factors — like your credit score and debt-to-income ratio — to determine whether what they'll earn from interest and other payments is worth the risk of making the loan.

An LTV of 80% or lower is most lenders’ sweet spot. Having a lower LTV can also help you get a lower interest rate. But depending on the rest of your finances, and the type of home loan you're using, you could have a loan-to-value ratio that's higher than 80%.

How you can use loan-to-value

Calculating your LTV can help you begin to make decisions about how much house you can afford or whether to move forward with a refinance. Here are some other choices your LTV can help you weigh.

• Would an ARM be a better option? If you have a high loan-to-value ratio, you might be able to lower your interest rate by considering an adjustable-rate mortgage. Adjustable-rate loans can be especially suitable for home buyers who plan on being in a home for only a few years.

• Am I trying to buy too much house? A high loan-to-value may mean you’re trying to stretch your homebuying budget a bit further than your down payment comfortably allows. Scaling back a bit on your dream home can make your down payment go farther and lower your LTV.

• How much of a down payment should I make? If your LTV is 80% or lower, you won’t have to pay mortgage insurance on a conventional loan. But making a smaller down payment — and thus having a higher LTV — could help you reach the goal of homeownership sooner. The right call is going to depend on your priorities.

» More for Canadian readers: What is a mortgage loan-to-value ratio?