Definition
The loan balance divided by the property's value, expressed as a percentage. Lenders use LTV to price risk: it decides whether a mortgage needs PMI (above 80%), how large a HELOC can be, and whether a refinance qualifies.
Why it matters
LTV sits behind several money events homeowners care about: dropping PMI, tapping equity, refinancing. It moves two ways, payments lowering the numerator and market prices moving the denominator, so appreciation alone can unlock options.
Example
A buyer puts 10% down on a $400,000 home: a $360,000 loan, 90% LTV, so PMI applies. Three years later the balance is $346,000 and the home appraises at $455,000, a 76% LTV, so PMI can go and a HELOC against the equity becomes possible.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.