One ratio decides whether you're paying PMIInsurance that protects the lender, paid by you, until you own 20%.Click to open the full glossary., whether you can refinanceReplacing your loan with a new one on better terms.Click to open the full glossary. without extra insurance, and how much equityThe share of your home you own outright.Click to open the full glossary. 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). Each payment cuts what you owe a little. Paying more cuts it faster. That drops the top half of the sum.
- Appreciation (rising home value). If your home goes up in worth, you own more of it. That is true even if you owe the same. It lifts the bottom half of the sum, which drops the result.
In a strong market both work at once. That is why many owners get to 80% years before their first plan said they would.
Your 80% by-request right to ask runs off what you paid for the home. If your home has gone up and you pay for a fresh check, they can use what it is worth now. Your 78% automatic stop date works the other way. It runs off what the home was worth then, and off your first plan. What it is worth today does not count.
Why lenders care so much about this one number
This one number tells a lender the most about risk. Hold 20% equity and you have real skin in the game. Walking away would cost you. Own almost none and you have far less to lose. That is the whole point of PMI. It covers the lender while you owe more than 80%. And the law says it must go once that risk falls far enough.
"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. Look at what comparable homes near you sold for. A free online estimate is a starting point. But if you want PMI canceled because your home has gone up in value, your servicer will want a formal appraisal.
- Divide balance by value. Times it by 100 for a percent. Is it 80 or less? Then you can likely ask them to end PMI.
Our free PMI drop-date calculator works out where you stand now. It maps both your dates from your real numbers, at once.
Doing this by hand means finding your bill. Then estimating what your home is worth. Every few months. We track it for you and tell you the day you cross the line.
Know your LTV without doing the math
We track your LTV as your balance falls. And we email you the month you reach 80%.
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