# What is loan-to-value (LTV)?

It compares your loan’s value with the value of your house. Here’s how lenders calculate LTV in the case of a home equity loan: your current loan balance divided by the current appraised value of your home.

Example

If you owe \$140,000 on your home, that’s your loan balance. If the home is worth \$200,000, you have a 70% LTV: \$140,000 divided by \$200,000 is .70 or 70%.

The lower the better

If you want to borrow \$25,000 in a home equity loan, you add that to the \$140,000. So your calculation would now be \$165,000 divided by \$200,000, which would be .825 or 82.5%. Lenders typically loan up to 85% for a home equity loan. The lower your LTV, the better.

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Another example

Let’s say you want to buy a house for \$100,000, and you need to borrow \$90,000. You would have a 90% LTV. You might have a difficult time getting a mortgage with an LTV that high, depending on your lender.

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