LTV = (Loan Amount ÷ Property Value) × 100. Example: $240,000 loan ÷ $300,000 home = 80% LTV. The higher your LTV, the riskier the loan is to the lender — so rates, fees, and insurance requirements all increase. The lower your LTV, the better terms you get.
| Loan Type | Max LTV (Purchase) | Max LTV (Refinance) | PMI/MIP Required? |
|---|---|---|---|
| Conventional | 97% | 97% (rate-and-term) | Yes, above 80% LTV |
| FHA | 96.5% | 97.75% | Yes — MIP for life (if >90% LTV) |
| VA | 100% | 100% (IRRRL) | No PMI — funding fee instead |
| USDA | 100% | 100% (streamlined) | Yes — guarantee fee |
| HELOC | 90% CLTV (combined with first mortgage) | No | |
| Cash-Out Refi | 80% conventional; 85% FHA; 90-100% VA | ||
80% LTV is the magic number in mortgage lending. At 80%: PMI is not required on conventional loans. You qualify for the best interest rates. Cash-out refinances are available. You can cancel existing PMI. Getting from 90% to 80% LTV can save thousands per year in PMI premiums alone. On a $300,000 home, going from 90% to 80% LTV means paying down by $30,000 — but eliminating $100-$300/month in PMI is a 4-12% annual return on that $30,000 before even counting interest savings.
1. Larger down payment — the most direct way. Going from 3% to 20% down drops LTV from 97% to 80% immediately.
2. Pay down principal — extra principal payments chip away at LTV. Each $1,000 of extra principal = ~0.33% LTV reduction on a $300,000 home.
3. Home appreciation — if your home value increases, your LTV drops automatically. Use a new appraisal to document this.
4. Renovations that add value — a $30,000 kitchen reno that adds $50,000 in value improves your LTV and gives you a nicer home.