What Is a Good Loan-to-Value Ratio?

A good loan-to-value ratio is usually 80 percent or lower. Your loan-to-value ratio, or LTV, is the loan amount divided by the property value, shown as a percent. Lower is better, and 80 percent or below is the common sweet spot because it typically lets you avoid private mortgage insurance and earn better interest-rate pricing.

The Short Answer: What a Good LTV Ratio Is

Loan-to-value ratio measures how much of a property’s value is covered by debt. A lender looks at it to gauge risk: the less you owe relative to what the home is worth, the more cushion the lender has if the loan ever goes bad. That is why a lower LTV is treated as safer and rewarded with better terms.

As a practical benchmark, 80 percent is the line most people aim for. At or below 80 percent LTV, conventional borrowers generally avoid private mortgage insurance and see the best available pricing. According to the Consumer Financial Protection Bureau (CFPB), lenders use LTV to decide eligibility, whether PMI is required, and the interest rate you are offered. A higher LTV usually means a higher rate because it signals more risk.

So a “good” LTV is not a single magic number. It is a range: 80 percent and under is strong, the low-to-mid 70s and below is excellent, and anything above 80 percent starts adding cost and narrowing your options.

How to Calculate Your Loan-to-Value Ratio

The formula is simple:

LTV = (Loan Amount / Property Value) x 100

Property value means the appraised value or purchase price, whichever the lender uses (usually the lower of the two for a purchase). Here is a clean worked example.

Suppose you are buying a home appraised at 400,000 dollars and you borrow 320,000 dollars after putting down 80,000 dollars.

LTV = (320,000 / 400,000) x 100 = 80 percent.

That 80 percent puts you right at the threshold where PMI is typically avoided. If you had borrowed 360,000 dollars instead with a smaller 40,000 dollar down payment, your LTV would be 90 percent, and PMI would very likely apply. The larger your down payment, the lower your starting LTV. If you already own, the fastest way to see your current LTV is to check your equity first with the Home Equity Calculator, since your equity and your LTV are two sides of the same value.

LTV Thresholds and What Each Band Typically Means

Different LTV bands map to different outcomes on pricing, insurance, and approval. The table below shows the general pattern for conventional loans. PMI thresholds reflect CFPB guidance; exact rate offers vary by lender and credit profile.

Reading the table, the pattern is consistent: cost and friction rise as LTV climbs. The move from 81 percent down to 80 percent is the one that most often flips PMI on or off, which is why buyers work hard to land at or under that line.

Why LTV Matters: Rates, PMI, and Approval

LTV influences three things that shape the real cost of a mortgage.

Interest Rates

Lenders price risk. A lower LTV means you have more skin in the game, so lenders offer sharper rates. As LTV rises, rate add-ons often appear, quietly raising your monthly payment over the life of the loan. You can test how a rate change flows through to your payment with a mortgage calculator.

Private Mortgage Insurance

PMI is insurance you may be required to buy on a conventional loan when your down payment is under 20 percent, which is the same as an LTV above 80 percent, per the CFPB. It protects the lender, not you, and it adds to your monthly cost. Lowering your LTV to 80 percent or below is the cleanest way to sidestep it. A PMI calculator can estimate how much that extra premium adds each month.

Approval and Options

A lower LTV widens the set of programs and lenders willing to work with you and improves your odds of a smooth approval. A high LTV pushes you toward specialized products with stricter rules. Planning your down payment up front is the lever with the biggest effect here, since a larger down payment directly lowers your starting LTV.

The 80 Percent and 78 Percent PMI Rules

Two federal thresholds govern when PMI can come off a conventional loan, and they are worth knowing because they turn LTV into real dollars saved.

The 80 percent rule (request cancellation). Per the CFPB, you can ask your servicer to cancel PMI once your principal balance reaches 80 percent of the home’s original value. The servicer must honor the request if you have a good payment history, are current, can certify there are no junior liens, and can show the value has not declined.

The 78 percent rule (automatic termination). The CFPB explains that your servicer must automatically terminate PMI on the date your balance is scheduled to reach 78 percent of the original value, provided you are current on payments. In other words, waiting does the work for you, but requesting at 80 percent removes the premium sooner.

There is also a common 80 percent cap on cash-out refinances. Many lenders limit a cash-out refinance so your new loan does not exceed 80 percent of the home value, which preserves an equity cushion. That cap is one reason your target LTV shifts depending on what you are trying to do.

A “Good” LTV Depends on Your Goal

The right target LTV changes with what you are doing. Here is how the benchmark shifts.

Buying a Home

Aim for 80 percent or lower to avoid PMI and win better pricing. If you cannot reach 80 percent yet, know that PMI is temporary and drops off as your LTV falls toward 78 percent.

Rate-and-Term Refinance

A good LTV for refinance is again 80 percent or below, which gives you the cleanest access to the best rates and avoids new mortgage insurance. The lower your LTV going in, the more refinance offers open up to you.

Cash-Out Refinance

Because many lenders cap cash-out refinances near 80 percent LTV, your equity buffer sets the ceiling on how much cash you can pull. A lower current LTV means more room to borrow while staying under the cap.

HELOC or Home Equity Loan

When you tap equity through a second loan, lenders look at combined loan-to-value, or CLTV. CLTV adds every loan secured by the home, first mortgage plus the new line or loan, and divides that total by the value. A good CLTV for equity borrowing is often 80 to 85 percent or lower. To understand how much of your equity is actually reachable and how CLTV limits it, see our guide on how to borrow against your home. If your goal is to lift equity and lower LTV faster, our walkthrough on building home equity faster covers the practical moves.

FAQs About Loan-to-Value Ratio

Sources

Updated September 9, 2026. This article is for general education only and is not financial, lending, or investment advice; your rates, PMI, and eligibility depend on your lender, credit, and property. Reviewed for accuracy by Prof. Dr. Khalil Mudassar, PhD.