Behind almost every mortgage decision is one number: your loan-to-value ratio, or LTV. It's the size of your loan divided by your home's appraised value, so if your home is worth $400,000 and you owe $280,000, your LTV is 70%.
Between 80% and 95%, PMI or pricing adjustments may apply.
Lenders use LTV to measure risk, and the number drives a surprising amount of your experience: rate pricing, loan options and whether mortgage insurance applies. The lower your LTV, the more options typically open up.
If you're planning a cash-out refinance, LTV matters even more. Most lenders cap cash-out LTV at 80%, so the amount of equity you can access depends directly on this number.
Knowing your LTV before you apply makes the conversation with your lender faster and more productive.
Start with your current balance and a realistic estimate of your home's value, and you'll know which of these ranges you're likely to fall in before anyone orders an appraisal.
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In reality, strategic refinance borrowers most often use funds for targeted goals, like debt reduction, home improvements, and financial planning. And with homeowner equity near historic highs, many borrowers have significant value left after refinancing.
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A loan officer can estimate your LTV from your balance and a likely appraised value, and show which refinance options and how much cash-out it allows. Pre-qualifying will not affect your credit score.
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