Loan-to-Value Ratio
Loan size as a percentage of property value.
Formula
Live Calculator
MembersVariables
Example
$240k loan on $300k home: LTV = 80%
How it works
The loan-to-value ratio compares how much money is borrowed against a property with the property’s appraised or purchase value. Multiplying by 100 turns the fraction into a percentage, so you can quickly see what share of the property is being financed by debt. Lenders use it because a lower LTV usually means less risk: if the borrower defaults, there is more property value available to cover the loan.
When to use it
Use this when applying for a mortgage, refinancing, or checking whether a property purchase meets a lender’s borrowing rules. It is also useful for estimating when private mortgage insurance might be required and for comparing how much equity is in a home.
Worked example, step by step
A buyer takes out a $180,000 mortgage on a house valued at $225,000. LTV = (L / V) × 100 LTV = (180,000 / 225,000) × 100 LTV = 0.8 × 100 LTV = 80% So the loan-to-value ratio is 80%.
Common mistakes to avoid
- using the monthly payment instead of the total loan amount
- dividing by the loan amount instead of the property value
- forgetting to convert the result to a percentage by multiplying by 100
Did You Know?
Lenders often require mortgage insurance above 80% LTV — the borrower has less 'skin in the game'.
Share this formula
More in Real Estate & Mortgages
View allMortgage Monthly Payment (EMI)
IntermediateFixed monthly repayment on a mortgage.
Capitalisation Rate
IntermediateAnnual return on a property from net operating income.
Gross Rental Yield
BasicAnnual rent as a percentage of property price.
Net Operating Income
BasicRental income minus operating expenses.
Price per Square Metre
BasicProperty price divided by floor area.
Return on Investment
BasicProfit as a percentage of money invested.