Mortgage Loan to Value Ratio Calculator

  LTV Calculator  
  Current appraised value  
  Loan Balance (1st loan)  
  Loan Balance (2nd loan)  
  Loan Balance (3nd loan)  
  Loan to Value  
  Combined Loan to Value  

When applying for a mortgage or home equity loan, a key factor lenders evaluate is your loan-to-value (LTV) ratio. This compares the loan amount to the appraised property value. The combined LTV or CLTV ratio is critical when you have an existing mortgage and want to take out a second lien.

Learning what CLTV is, how to calculate your ratio, and the guidelines lenders follow can help you determine the maximum borrowing capacity on your home. Read on for a complete guide to combined LTV ratios and online calculators that make it easy to assess your equity position.

Main Topics:

  • What is a combined loan-to-value (CLTV) ratio?
  • How to calculate your CLTV ratio
  • CLTV formula explained
  • Factors impacting CLTV
  • Lender CLTV ratio guidelines
  • Benefits of using a CLTV calculator
  • Property appraisal’s role in determining CLTV
  • How lenders use CLTV to assess risk
  • Comparing types of mortgage insurance by LTV
  • Tips for calculating CLTV before applying

What Is a Combined Loan to Value (CLTV) Ratio?

A combined loan-to-value (CLTV) ratio compares the sum of all mortgage liens and home equity loan balances on a property to its appraised market value.

For example, if your home is worth $300,000, and you have an existing $200,000 mortgage, then take a $50,000 home equity loan, your CLTV is:

($200,000 + $50,000) / $300,000 = 83% CLTV

The CLTV ratio shows your equity position and how much leverage is on the home. Lenders review CLTV when underwriting new loans or lines of credit.

How to Calculate Your CLTV Ratio

Here is the formula to determine your property’s combined LTV ratio:

CLTV = (Outstanding Mortgage Balance + New Loan Amount) / Home Appraised Value

To perform the calculation:

  1. Add up current mortgage loan balances and any new proposed liens

  2. Divide the total by the appraised fair market value of the home

  3. Multiple by 100 to convert to a percentage

An online CLTV calculator simplifies this process. Input your existing lien balances, new loan amount sought, and latest property valuation to instantly get your ratio.

CLTV Formula Example

Let’s walk through an example CLTV calculation:

  • You have a home valued at $500,000
  • Existing primary mortgage balance = $300,000
  • Want to take a $50,000 home equity loan

CLTV = ($300,000 + $50,000) / $500,000 x 100
CLTV = $350,000 / $500,000 x 100 CLTV = 70%

This shows a CLTV of 70% on the home, meaning combined loans represent 70% of the total property value.

Factors Impacting Your CLTV Ratio

When determining CLTV, here are vital factors to consider:

Loan balances - The combined total of all mortgage and home equity loan balances affects CLTV. Paying down balances lowers it.

Appraised value - A higher home appraisal reduces CLTV by increasing the denominator. Accurate valuations are critical.

New loan amount - The size of any new loan impacts the ratio. Larger loans mean higher CLTVs.

Home improvements - Upgrades like adding a bathroom can increase property value to offset new financing.

Home price changes - Appreciation lowers CLTV over time by raising the home’s market value. Price declines increase it.

Paying down the principal - Making extra mortgage payments reduces your main loan balance, helping decrease CLTV.

Lender CLTV Ratio Guidelines

Lenders follow general CLTV ratio guidelines when evaluating loan applications:

  • 80% CLTV or lower - Acceptable for conventional mortgages with standard mortgage insurance

  • 90% CLTV or lower - Generally required for conforming home equity loans and HELOCs

  • 97% CLTV or lower - Maximum for conforming mortgages requiring high LTV mortgage insurance

The lower the ratio, the less risky the loan is deemed based on available equity to absorb potential losses. High CLTV loans may face tighter approval standards or require mortgage insurance.

Benefits of Using an Online CLTV Calculator

Online combined LTV calculators offer convenience and accuracy. To determine your CLTV ratio:

  • Visit a mortgage website offering a CLTV calculator

  • Input your total existing mortgage debt, the amount of new loan sought, and the home’s current value

  • Instant CLTV calculation results display

An online calculator ensures you avoid any mathematical errors impacting your ratio. It also lets you quickly test different scenarios by adjusting values.

Importance of Accurate Property Valuation in CLTV

Getting an accurate appraisal is crucial since the CLTV formula divides loan amounts by the home’s market value.

  • Compare valuations if you have multiple appraisals. Use the most recent.

  • Ask your lender to justify the valuation if it seems too low or high.

  • Remember, renovations and market appreciation can increase value over time.

Insist on a fair, up-to-date appraisal as the denominator significantly influences your CLTV calculation results.

How Lenders Use CLTV to Assess Risk

Lenders evaluate CLTV ratios to gauge inherent risk when underwriting mortgages and home equity products.

Higher CLTVs signal higher risk. With less equity buffer, defaults are more likely to result in losses for the lender.

Lenders may impose stricter loan requirements on high CLTV applications, like:

  • Lower maximum loan amounts
  • Higher interest rates
  • Mandatory mortgage insurance
  • Minimum credit score thresholds
  • Lower debt-to-income ratio caps

Carefully managing your CLTV helps you access better loan terms and interest rates.

Comparing Mortgage Insurance by LTV

Different mortgage insurance types are required at different CLTV levels:

80-85% LTV - Requires standard private mortgage insurance

85-90% LTV - Needs to be expanded private mortgage insurance

90-97% LTV - Demands government FHA insurance

Each option entails different upfront and ongoing costs. The higher your desired CLTV, the more expensive mortgage insurance gets.

Tips for Calculating CLTV Before Applying

When determining your CLTV ratio:

  • Use an online calculator for convenience and accuracy

  • Check it before applying either for mortgages or home equity loans/lines

  • Test different new loan amounts to see the impact on your ratio

  • Ensure the appraised value accurately reflects current market conditions

  • Strive for at least 20% equity to access the best loan rates and terms

Carefully calculating your CLTV helps assess the maximum borrowing potential on your home. Monitoring changes over time also allows for strategically keeping your ratio low.

Understanding combined loan-to-value ratios gives you greater insight into home equity and helps inform intelligent lending decisions.


Recommended Reading

Maximum LTV for a Conventional Cash-Out Refinance
Conventional Loan Guidelines: Debt to Income Ratio Explained Frequently Asked Questions about Conventional Loans Conventional Loan Limits for 2024: How Much Can You Borrow?