Where this LTV stands
| Programme | Maximum LTV | Your loan | Notes |
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When the mortgage insurance comes off
Loan-to-value is the loan divided by what the property is worth. Lenders use it to price the loan, to decide whether mortgage insurance is needed, and to decide whether they will lend at all.
Which value counts
On a purchase, lenders use the lower of the price and the appraisal. If you agree $400,000 and the appraisal comes in at $385,000, the LTV is worked out on $385,000, and the gap comes out of your deposit. On a refinance, the current appraised value is used. That rule comes straight from Fannie Mae's selling guide.
Two variations matter when there is more than one loan on the property. CLTV adds the balance of any second mortgage. HCLTV, sometimes called HTLTV, uses the full credit line of a HELOC rather than the drawn balance, because the borrower could draw it all tomorrow.
The 80% line
Eighty percent is the level that matters most. Above it, a conventional loan usually needs private mortgage insurance. Below it, the insurance can come off and pricing improves.
The Homeowners Protection Act sets three rules for getting PMI removed on a primary residence:
- At 80% of the original value, you can ask in writing for it to be cancelled, provided you have a good payment history, are current, and there are no junior liens. The lender can require evidence that the value has not fallen.
- At 78% of the original value, the servicer must cancel it automatically if you are current.
- At the midpoint of the term, halfway through a 30-year loan at year 15, it must come off anyway if you are current, whatever the balance.
Note that all of this is measured against the original value, not today's. Rising prices do not trigger the automatic rules; for that you need to ask, with an appraisal.
FHA loans work differently: the insurance follows HUD's rules rather than the Homeowners Protection Act, and on many loans it lasts either 11 years or the life of the loan, depending on the original LTV. Check the current HUD mortgagee letters for your case.
What a lower LTV buys you
- A better rate. Pricing steps down at 80%, 75% and 60% on most conventional loan sheets.
- No mortgage insurance at 80% and below.
- More options on a refinance. Cash-out on a one-unit home is capped at 80% by the main conventional programmes.
Quick answers
How do I calculate loan-to-value?
Divide the loan by the value of the property and multiply by 100. On a purchase, use the lower of the price and the appraisal.
What LTV do I need to avoid PMI?
80% or below on a conventional loan. Above that, private mortgage insurance is normally required until the balance falls.
When does PMI automatically come off?
At 78% of the original value if you are current, or at the midpoint of the loan term, whichever comes first. You can request cancellation at 80%.
What is CLTV?
Combined loan-to-value: the first mortgage plus any second mortgage or home equity loan, divided by the value. Lenders use the full HELOC line rather than the drawn balance for HCLTV.
What is the maximum LTV on a mortgage?
Up to 97% on many conventional purchases, 96.5% on FHA, and 100% on VA and USDA. Cash-out refinancing on a conventional loan is capped at 80%.
Sources
- Fannie Mae Selling Guide B2-1.2-01, LTV, CLTV and HCLTV, and which value is used
- Fannie Mae Eligibility Matrix (maximum LTVs, August 2026)
- Homeowners Protection Act, 12 U.S.C. § 4902, cancellation and automatic termination of PMI; CFPB, removing PMI
- HUD Mortgagee Letter 2023-05, FHA mortgage insurance premiums (check for later letters)
- VA Circular 26-19-05, the 100% limit on cash-out refinancing