Mortgage LTV vs. CLTV: What Are the Differences?

Updated: 28th Dec 2021 Written by Kim Pinnelli
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You can’t borrow 100% of a home’s sales price in most cases. While some loans offer 100% financing, most require at least a small down payment.

To determine how much investment you have in the home and whether you are eligible for the mortgage, lenders will look at both your LTV and CLTV.

Both figures are important to determine if you’re a good candidate for a loan. Here’s what you must know.

Mortgage LTV vs. CLTV Overview

Lenders look at your LTV when you apply for a mortgage. If you borrow too much compared to the home’s value, your loan is considered a higher risk. But if you have more than one mortgage, there are two factors they look at – mortgage LTV and CLTV.

Both factors affect your ability to secure mortgage lending. Your CLTV will always be higher than the LTV because it’s the combined LTV for all loans.

Understanding LTV

Your mortgage LTV is the loan-to-value ratio of the loan in question. Let’s say you have a 1st and 2nd mortgage and are refinancing the first loan. The lender would focus on the LTV of the first mortgage to determine your eligibility.

Understanding CLTV

Your combined loan-to-value ratio combines all loans on the property compared to the home’s value.

If you have a second mortgage, you’d add all loan amounts together and compare it to the home’s value to get the CLTV.

What Are the Differences Between LTV and CLTV?

LTVs focus on one loan at a time, and CLTV is a combination of all loans. Mortgage Lenders typically allow a higher CLTV than LTV to keep your loans affordable but within their guidelines.

Mortgage LTV vs. CLTV Calculations

Knowing how to calculate the LTV and CLTV will help you determine if you qualify for certain loan programs based on their requirements.

Calculating LTV

To calculate the LTV of a loan, you need only the loan amount and the home’s value. You take the loan amount and divide it by the home’s value.

For example, if you borrow $200,000 and the home is worth $300,000, the LTV is 67%. This means you borrowed 67% of the home’s value.

The lender uses this value to determine the riskiness of your loan. The lower your LTV is, the less risky you are, and you’ll typically get better interest rates and lower origination fees.

Calculating CLTV

To calculate the CLTV, you need the balance of all loans on the property. You divide this total by the home’s value to get the CLTV.

Using our example from above, if you have a $200,000 first mortgage and a $ 50,000-second mortgage, your CLTV would be $250,000/$300,000 or 83%.

>> More: What is Debt-to-Income Ratio?

Why Is CLTV Important in the Mortgage Process?

The CLTV gives lenders the big picture. If you have a large second mortgage, such as a home equity line of credit, you could be a riskier borrower if you’re trying to refinance your first mortgage. Some people even use a second mortgage to buy a property. It’s called a piggyback loan.

Let’s say you were eligible for a HELOC when you’re buying a home. You withdraw from the HELOC to make the down payment on the home. This means you now have a CLTV because you have two loans out on the home.

The down payment lowers the LTV on your first mortgage, but the CLTV tells the big picture. You didn’t put money down from your own pocket – you borrowed it from the home’s value. This helps lenders determine your level of risk and if you might default on the mortgage.

>> More: Find Out How to Refinance Your Mortgage

Why Is LTV Important in the Mortgage Process?

The LTV matters because it’s a guide for lenders when they loan you money. Most loan programs have a maximum LTV.

If you look at it in the opposite way, they have a minimum down payment. Online mortgage lenders want you have a certain amount of money invested in the home.

This gives you ‘skin in the game’ and makes you more likely to make your mortgage payments.

Bottom Line: Mortgage LTV vs. CLTV

Understanding the difference between mortgage LTV and CLTV is important before you apply for a loan.

No matter what loan program you’re applying for, the more money you have invested in the home, the lower your LTV and CLTV are and the higher your chances of approval.

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer , Editor, & Product Analyst with a Bachelor’s degree in Finance from the University of Illinois at Chicago. She has been a professional writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Kim is committed to helping people take charge of their personal finance. Her areas of expertise spans mortgages, credit cards, credit, and loans.