Loan to Value Calculator (LTV, CLTV and PMI Threshold)

Two ratios describe how much of a property is financed, and confusing them is the most common mistake in home equity borrowing.

LTV counts the first mortgage only against the property value. CLTV counts every lien secured on the property -- the first mortgage, any second, and any drawn HELOC balance.

They coincide only when there is a single loan. As soon as a second lien exists they diverge, and here the gap is 10 percentage points. Most lenders set their approval and pricing limits on CLTV, so that gap is the difference between an approval and a decline.

The 80% threshold matters separately: conventional private mortgage insurance is generally required above it, can be cancelled on request at 80%, and terminates automatically at 78%.

Property value means the appraised value or the purchase price, whichever is lower. Lenders will not lend against a price above appraisal.

The calculator also shows the two routes to 80% LTV: paying down principal, and the property appreciating. Both work, and only one is under your control.

$400,000 property, $320,000 first mortgage, $40,000 HELOC:

• LTV: $320,000 ÷ $400,000 = 80.00%
• CLTV: $360,000 ÷ $400,000 = 90.00%
• Gap: 10 percentage points
• Equity after all liens: $40,000, or 10% of value

On LTV alone this borrower is at the PMI threshold and looks well capitalised. On CLTV they have only 10% equity, and most lenders would treat that very differently.

With no HELOC: LTV and CLTV are both 80.00%. The two ratios only diverge when a junior lien exists.

A 95% LTV purchase ($380,000 on $400,000): PMI is required, and reaching 80% needs $60,000 of principal repayment.

If the property appreciates to $500,000: LTV falls to 64.00% and CLTV to 72.00%, without a dollar of principal being repaid. This is why homeowners in rising markets can often cancel PMI earlier than their amortisation schedule suggests.

• Undrawn HELOC capacity. Some lenders count the full committed line rather than the drawn balance when assessing CLTV, which can raise the ratio substantially.
• Which value the lender uses. A new appraisal may come in below your estimate, and lenders use the lower of appraisal and purchase price.
• HCLTV. A further variant used by the agencies that counts the full HELOC commitment.
• Loan programme limits. FHA, VA and USDA loans have their own maximum LTVs and their own mortgage insurance rules, which differ from conventional PMI.
• PMI cost. This shows where the threshold sits, not what the premium would be.
• Cancellation requirements. Cancelling PMI at 80% typically requires a request in writing, a good payment history, and often a new appraisal at the borrower's expense.
• Lender-paid mortgage insurance, where the cost is built into a higher rate and never cancels.
• Cash-out refinance limits, which are usually stricter than purchase limits.

• Quoting LTV when the lender wants CLTV. With a second lien these are different numbers, and the lender's decision rests on the higher one.
• Assuming PMI drops off at 80% automatically. Automatic termination is at 78% of the original amortisation schedule. Cancelling at 80% requires you to ask, and usually to pay for an appraisal.
• Using your own estimate of value. The lender uses the appraisal, and on a purchase the lower of appraisal and price.
• Forgetting undrawn HELOC capacity. A $100,000 line with $10,000 drawn may be assessed on the full $100,000 by some lenders.
• Expecting appreciation to cancel PMI on its own. It can, but usually requires a new appraisal and a formal request, and some servicers impose a seasoning period.
• Comparing conventional and FHA thresholds. FHA mortgage insurance follows entirely different rules and on many loans never cancels at all.

• Standard mortgage underwriting ratios. LTV and CLTV are arithmetic definitions with no jurisdictional content.
• The 80% cancellation and 78% automatic termination thresholds reflect the conventional PMI framework under the Homeowners Protection Act.
• Lender treatment of undrawn HELOC capacity varies, which is noted rather than assumed.