LTV — loan-to-value ratio — is the single most important number in mortgage pricing. It determines your rate tier, whether you need PMI, whether you can cash-out refinance, and whether you qualify for certain programs. LTV = loan balance / current home value.
Worked example: $425,000 home, $340,000 loan → 80.0% LTV (the no-PMI threshold for conventional). $425,000 home, $400,000 loan → 94.1% LTV (PMI required, higher rate tier).
Key LTV thresholds
- 60% and below — best conventional rate tier. Rare for purchase, common after 10+ years of ownership with appreciation.
- 60-70% — solid rate tier. Typical cash-out refi limit is 80% on conventional primary.
- 70-75% — still low-rate tier. Max LTV for investment property cash-out.
- 75-80% — baseline conventional. No PMI.
- 80.01-85% — mild LLPA pricing hit. PMI required.
- 85.01-90% — higher PMI, higher rate.
- 90.01-95% — conventional 5%-down territory. Expensive PMI.
- 95.01-97% — conventional floor (HomeReady/HomePossible). FHA still beats this most of the time.
- 96.5-100% — FHA (3.5% down) and VA/USDA (zero down) zone.
Refinance LTV limits
- Rate-and-term refi: up to 97% LTV conventional, 97.75% FHA, 100% VA.
- Cash-out refi: 80% LTV conventional, 80% FHA, 90% VA.
- Investment property cash-out: 75% LTV conventional.