One ratio decides whether you're paying PMI, whether you can refinance without extra insurance, and how much equity you actually have. It's simpler to calculate than most homeowners think.
The formula
If you owe $304,000 on a home worth $380,000, your LTV is 304,000 ÷ 380,000 = 80%. The lower your LTV, the more equity you have, and the less risk a lender is taking on.
Two ways your LTV improves
- Amortization (paying down principal). Every scheduled payment reduces your balance a little, and extra principal payments reduce it faster. This lowers the numerator in the LTV formula.
- Appreciation (rising home value). If your home's market value increases, your equity grows even if your balance doesn't change. This raises the denominator, which also lowers your LTV.
In a rising market, both levers work together, which is why many homeowners reach 80% LTV years earlier than their original amortization schedule alone would suggest.
Your 80% by-request cancellation right is based on your original purchase price (or appraised value at closing, if higher), or current market value if you're relying on appreciation and get a fresh appraisal. Your 78% automatic termination, by contrast, is always based on the original value and original amortization schedule, regardless of what your home is worth today.
Why lenders care so much about this one number
LTV is the single biggest predictor of default risk on a mortgage. A borrower with 20% equity has a real financial stake that makes walking away expensive, while a borrower with little or no equity has much less to lose. That's the entire logic behind PMI: it exists specifically to cover the lender's risk while your LTV is above 80%, and the law requires it to go away once that risk drops to an acceptable level.
"LTV is the single biggest predictor of default risk. That's exactly why it's the number PMI cancellation hinges on."
How to estimate your current LTV yourself
- Find your current balance. It's on your latest mortgage statement.
- Estimate your home's current value. Recent comparable sales in your neighborhood, or a free online estimate, are a reasonable starting point; a certified appraisal is required if you're requesting cancellation based on appreciation.
- Divide balance by value. Multiply by 100 to get a percentage. At or below 80%? You likely qualify to request PMI cancellation.
Our free PMI drop-date calculator computes your current LTV and projects both your 80% and 78% dates from your real numbers, instantly.
Checking your LTV manually means pulling your statement and estimating your home's value every few months. CasaCrow tracks it continuously and tells you the moment you cross the 80% line.
Know your LTV without doing the math
CasaCrow tracks your loan-to-value ratio in real time and alerts you at 80%.
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