If you're buying a home or investing in real estate, you've probably heard the term LTV. But what does it actually mean—and why does it matter?
In this 2025 guide, we'll break down Loan-to-Value (LTV), how it's calculated, and how it impacts your mortgage in Colorado.
What Is LTV?
LTV stands for Loan-to-Value ratio. It measures the size of your loan compared to the value of the property you're buying or refinancing.
LTV = Loan Amount ÷ Property Value × 100
Example of LTV
Let's say:
- Home price: $400,000
- Loan amount: $320,000
LTV = 80%
This means you're borrowing 80% of the home's value and putting down 20%.
Why LTV Matters
LTV is one of the most important factors lenders use when approving a loan. It affects:
Interest Rate
- Lower LTV = lower risk = better rates
- Higher LTV = higher risk = higher rates
Mortgage Insurance (PMI)
- Over 80% LTV → PMI required (for most conventional loans)
- 80% or less → PMI typically not required
Loan Approval
Lower LTV makes it easier to qualify.
Typical LTV by Loan Type (2025)
Conventional Loans
Up to 97% LTV (3% down) — 80% LTV to avoid PMI. See our conventional loans guide.
FHA Loans
Up to 96.5% LTV — requires mortgage insurance.
VA Loans
Up to 100% LTV — no down payment required for eligible borrowers.
DSCR Loans (Investment Properties)
Typically 70%–80% LTV, with 75% being most common. Read more in our DSCR loans explained guide.
LTV for Refinancing
When refinancing, LTV is based on your home's current value.
Example: Home value $500,000, loan balance $350,000 → LTV = 70%
Cash-Out Refinance LTV
Most lenders allow up to 75%–80% LTV for cash-out refinances. See our cash-out refinance guide for more.
LTV vs Down Payment
Your down payment directly impacts your LTV:
- 20% down → 80% LTV
- 10% down → 90% LTV
- 5% down → 95% LTV
More down = lower LTV.
For more on planning your down payment, see our 2025 down payment guide.
LTV in Colorado Markets
LTV plays a big role in competitive markets like Denver, Colorado Springs, and Montrose. Higher home values often mean larger loan amounts and more importance on managing LTV.
Final Thoughts
LTV is a key metric that affects your mortgage approval, interest rate, and overall loan structure. Understanding how it works can help you plan your down payment, improve your loan terms, and make smarter real estate decisions.
Want help structuring your loan? Determine your ideal loan structure, estimate your payment, and explore loan options.
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Frequently asked questions
How is LTV calculated?
LTV equals the loan amount divided by the lower of the appraised value or purchase price, expressed as a percentage.
What LTV avoids PMI?
On a conventional loan, putting at least 20% down (80% LTV or lower) avoids private mortgage insurance.
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