What Is Loan-to-Value (LTV) Ratio? Refinancing Impact

If you’re considering refinancing your mortgage, one number matters almost as much as your credit score: your Loan-to-Value (LTV) ratio. Lenders use LTV to measure risk, approve your refinance, price your rate, and determine whether you’ll need mortgage insurance.

Short version:

Your LTV tells lenders how much equity you have.

Lower LTV = lower risk = potentially better refinance pricing

Whether you’re aiming to lower your rate, remove PMI, tap equity through a cash-out refi, or switch loan types, understanding LTV is essential.

This guide explains what LTV is, how to calculate it, what counts as a “good” LTV, and how it impacts your refinance options.

• Actual pricing depends on many variables, not just your LTV, but minimizing your LTV may help secure competitive pricing

Key Takeaways

• LTV = (Loan Amount ÷ Home Value) × 100.

• Lower LTV may mean better rates, lower fees, and easier approval (results vary by borrower profile)

• Competitive refinance pricing is more commonly available at an LTV of 80% or lower

• Cash-out refinances often cap LTV at 75–80% (actual rules vary by lender)

• Your LTV affects PMI, rate adjustments, eligibility, and underwriting

💡 Pro Tip: Many homeowners may miss opportunities by not shopping around among different lenders. Every lender views LTV and other loan factors differently, resulting in different pricing.

What Is a Loan-to-Value (LTV) Ratio?

LTV measures how much you’re borrowing relative to your home’s value.

How LTV Works

LTV shows lenders how much equity you have. Think of it as the ownership of your home. If your home is worth $300,000 and you have a $200,000 mortgage, you own $100,000 of the home's equity, while the remainder belongs to the mortgage company.

LTV Formula

LTV = (Loan Amount ÷ Appraised Home Value) × 100

Example

• Home value: $500,000

• Loan balance: $375,000

375,000 ÷ 500,000 = 75% LTV (25% equity)

Why LTV Matters for Refinancing

LTV is one of the largest factors lenders use when evaluating risk.

Lower LTV May Help You:

• Qualify for a better rate

• Access lower lender fees

• Remove PMI

• Increase approval odds

• Unlock appraisal waivers

• Access cash-out options

Higher LTV Creates Challenges:

• Higher rates

• PMI requirements

• Additional underwriting scrutiny

• Possible loan denial

What’s a “Good” LTV for Refinancing?

80% LTV or Lower (Ideal Range)

• Often results in competitive pricing

• No PMI (conventional loans)

• Most programs available

70–75% LTV (Excellent)

• Potentially top-tier pricing

• More lender competition

• Strong likelihood of appraisal waivers

95% LTV (Highest Allowed on Some Programs)

• Limited loan options

• Higher fees

• PMI required

Above 95% LTV

It can be more challenging to find a loan program with an LTV above 95%, and many homeowners in this position must use FHA financing.

💡 Pro Tip: LTV is one of several factors lenders consider when pricing a loan. Comparing Loan Estimates from multiple lenders is the only way to determine if you have competitive pricing.

How LTV Requirements Differ by Refinance Type

Each refinance category has its own LTV rules.

Rate-and-Term Refinance

• Often allowed up to 95% LTV

• Risk-based pricing often improves at ≤80%

Cash-Out Refinance

Most common caps:

• 80% for single-family primary homes

• 75% for 2–4 unit properties

• 70% or lower for investment properties

FHA Refinance

• Rate-and-term: Up to 97.5% LTV

• Cash-out: Up to 80% LTV

VA Refinance

• IRRRL streamline: LTV often not required (requirements vary by lender)

• Cash-out: Up to 90% LTV

Jumbo Refinances

Usually requires 70–80% LTV, with stricter rules for multi-unit or investment properties.

• Actual requirements vary by lender, even within the same loan program.

How to Calculate Your LTV (Step-by-Step)

Step 1: Determine your current loan balance

Use your most recent mortgage statement or contact your mortgage lender to confirm your current balance.

Step 2: Estimate your home’s value

Most common methods:

• Recent comparable sales

• Realtor comparative market analysis

• Full appraisal (lender will order)

• You can also use Automated valuation models, such as Zillow, but use them with caution as they are not always accurate.

Step 3: Apply the LTV formula

Loan Amount ÷ Home Value × 100

Example

Loan: $420,000

Value: $560,000

→ 75% LTV

How Your LTV Affects Your Refinance Rate

Lenders use tiered pricing adjustments. Here’s the typical pattern, but actual pricing varies by lender and even by day:

Rate Impact by LTV Range

💡 Pro Tip: Even a 0.125–0.25% rate difference can save thousands over time, which is why getting quotes from multiple lenders is essential. You can shop around manually, or upload a single Loan Estimate to Fincast to receive multiple offers.

• Fincast does not provide loans or set pricing. All offers are made by independent, licensed lenders based on your Loan Estimate and individual qualifications.

How LTV Affects PMI (Mortgage Insurance)

PMI applies to conventional refinances with an LTV above 80%.

If your LTV is >80%

• PMI required

• Higher monthly payment

• Slower break-even

If your LTV is ≤80%

• PMI may be removed

• Lower monthly payment

• Faster break-even point

Dropping PMI is often one of the biggest refinance savings opportunities.

How to Improve Your LTV Before Refinancing

If your LTV is higher than you want, there are several ways to improve it.

1. Pay Down Your Loan

Even $5,000–$10,000 can shift pricing categories.

2. Increase Your Appraised Value

Small improvements help:

• Fresh paint

• Landscaping

• Lighting upgrades

• Minor bath/kitchen refreshes

3. Leverage Recent Sales

Recent comparable sales in the neighborhood can justify a higher value. Keep an eye on what neighbors sell their homes for and compare their homes’ features and conditions to yours to determine what you could do to increase your home’s value.

4. Avoid Cash-Out

Cash-out increases your loan amount — and your LTV.

Why LTV Makes Comparing Lenders So Difficult

Each lender uses different:

• LTV tiers

• Pricing adjustments

• Waiver rules

• Fee structures

• Risk premiums

Lenders use different pricing engines and risk models, which is why two quotes at the same LTV can differ by thousands. This makes comparing lenders nearly impossible without a standardized benchmark, which is why the Fincast platform is so powerful.

Here are a few real-world examples of Fincast users and how much they saved:

• A borrower in Texas saved $269 a month, which equates to $32,280 saved over 10 years

• A borrower in Colorado saved $111 a month, which equates to $13,320 saved over 10 years

How Fincast Helps You Get the Best Refinance for Your LTV

Fincast benchmarks your Loan Estimate — including its LTV-driven pricing — so lenders can compete to beat your deal.

How It Works

1. Upload your Loan Estimate

All you need is a single Loan Estimate from one lender. Upload it to Fincast to receive other offers. There’s no credit pull and no new application.

2. Fincast analyzes:

• Rate

• Lender fees

• Points

• Credits

• Cash-to-close

• Risk-based pricing tied to your LTV

3. Vetted lenders compete anonymously

You do not have to share your personal information. Lenders base the offer on your Loan Estimate. If you choose to move forward with a lender from Fincast, you can then share your personal information.

4. You choose the best offer

If your current lender offers the most competitive pricing, you’ll know. If not, you’ll see your exact potential savings and decide how to proceed.

FAQs About LTV & Refinancing

What’s the best LTV for refinancing?

Lenders prefer 80% or lower for ideal pricing; 70–75% for top-tier pricing, but your overall pricing depends on many factors, including your credit history, employment status, income, and debt-to-income ratio.

Can I refinance with high LTV?

Possibly — some programs allow up to 95% LTV, but with higher costs. Actual results vary by lender and borrower profile.

Does LTV affect my mortgage insurance?

Yes — PMI is required for LTVs above 80% in most cases.

What if my appraisal is lower than expected?

You can dispute it, provide new comparable sales, or, in some cases, request a second appraisal.

How can I know if my LTV pricing is competitive?

Compare Loan Estimates from multiple lenders to ensure you have the most competitive deal.

Bottom Line

Your Loan-to-Value ratio is one of the most important factors in your refinance — influencing your rate, fees, PMI, and overall savings. But every lender prices LTV differently, so comparing offers is essential if you want the best rate and lowest costs.

Action Checklist

☑️ Calculate your LTV

☑️ Check whether you’re above or below 80%

☑️ Get your Loan Estimate

☑️ Upload your LE to Fincast

☑️ Compare lenders anonymously

☑️ Choose the best refinance offer with confidence

👉 Ready to see whether your refinance rate matches your true LTV?

Upload your Loan Estimate to Fincast to quickly see how lenders actually price your LTV. You share your LE anonymously, so there’s no spam, no extra credit pulls —only potential savings.