Loan-to-Value (LTV).
In plain English
LTV compares your loan to the value of the home. Borrow $380,000 on a $400,000 house and your LTV is 95 percent. It is the number behind most mortgage rules: how big a down payment you need, whether you pay mortgage insurance, and when that insurance can come off. As you pay down the loan or the home gains value, your LTV drops.
02The math, step by step
Put 20 percent down and your starting LTV is 80 percent, the line where conventional lenders stop requiring PMI. Put 5 percent down and you start at 95 percent, so you pay PMI until the balance falls to 78 to 80 percent of the original value.
03What this is NOT
LTV is not your interest rate, though a lower LTV often earns a better one. It is a ratio, not a cost.
04Receipts
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