How to use the LTV calculator
The calculator opens with an example: a home worth $450,000, a first mortgage with $290,000 left to pay and a HELOC with $25,000 drawn.
- Home value. Use a recent appraisal, or recent sales of similar homes nearby. A lender will order its own appraisal before it lends.
- First mortgage balance. Take the principal balance from your latest statement. The original loan amount overstates it.
- Other liens. Add the balances of a HELOC, a home equity loan or a second mortgage.
- Lender’s maximum CLTV. The share of the value a lender will let all loans together reach. 80% is a common starting point, and some lenders go to 85% or 90%.
The chart shows how your equity and your borrowing room change if the home’s value rises or falls. The table compares your first mortgage with the LTV levels lenders use most often.
The formulas
CLTV = (First mortgage + Other liens) ÷ Home value
Home equity = Home value − All secured loans
Borrowable equity = Maximum CLTV × Home value − All secured loansAll amounts are in dollars and the ratios are shown as percentages. Borrowable equity is never shown below zero.
The drop in value that would wipe out your equity is your equity divided by the home’s value. It is the same number as your equity share, and the cushion you have before the home is underwater.
A worked example
The first mortgage of $290,000 on a $450,000 home gives an LTV of 64.44%. Adding the $25,000 HELOC brings the CLTV to 70.00%.
The loans total $315,000.00, so you own $135,000.00 of the home, 30.0% of its value.
A lender capping combined loans at 80% would allow loans of up to $360,000.00. That leaves room to borrow $45,000.00 more. At a 90% cap the figure rises to $90,000.00.
The home could lose 30.0% of its value before your equity reached zero.
LTV thresholds that change your loan
The 80% line matters most on a conventional mortgage. Above it, lenders usually require private mortgage insurance, and in the US the Homeowners Protection Act lets you ask for it to be removed at 80% of the original value. It must be cancelled automatically when the balance is scheduled to reach 78%. FHA loans follow their own mortgage insurance rules.
Take a $400,000 home with $340,000 still owed. The LTV is 85.00%, and you would need to repay $20,000.00 of principal to reach 80%.
For a purchase, conventional programs typically go up to 97% LTV and FHA loans to 96.5%. A cash-out refinance or a home equity loan usually stops lower, often at 80% to 90% combined. These are typical figures. The actual limit depends on the lender, the program, the property type and your credit score, so treat the table under the calculator as a guide.
When the home value falls
Equity moves faster than prices, because the loan stays the same while the value changes. If the example home fell from $450,000 to $360,000, a 20% drop, the CLTV would rise to 87.50% and equity would shrink to $45,000.00. The extra borrowing room at 80% would disappear: it falls to $0.00.
At $300,000, the loans would exceed the value and the home would be underwater by $15,000.00. An underwater owner usually cannot refinance, or sell without bringing cash to closing. That is why lenders keep a cushion below 100%.
Equity on paper versus equity you can use
Home equity is not cash. Agent commissions, transfer taxes and closing costs come out of it before you see any of it in a sale. Borrowing against it costs interest and puts the home up as collateral for the new debt. A large equity figure is a cushion and a source of options, not money you can spend without consequences.
What this calculator does not include
- Appraisal differences. Your estimate of the value may not match the lender’s appraisal, and the lender always uses its own figure.
- Approval criteria. Income, debt-to-income ratio, credit score and occupancy all decide whether you can borrow at a given CLTV.
- Selling costs and taxes. Equity is shown before commissions, closing costs and any capital gains tax.
- Full HELOC limits. If a lender counts your whole credit line rather than the amount drawn, enter the full limit as the lien.