One of the most common things affected by LTV is private mortgage insurance, or PMI. Most conventional loans require PMI if your LTV is above 80%. This is insurance that protects the lender—not you—in case you default on your loan. It’s an added monthly cost that can range from tens to hundreds of dollars depending on your loan size. The good news is that PMI isn’t forever. Once your LTV drops to 80% through regular payments or increased property value, you can typically request that it be removed.

LTV also comes into play when you’re refinancing your mortgage. If your home has increased in value or you’ve paid down a significant portion of your loan, your LTV may be lower than when you first bought the home. This could open the door to better refinance rates or allow you to take cash out of your equity. However, for cash-out refinances, lenders typically limit how high your LTV can go—usually capping it around 80%. If you’re doing a rate-and-term refinance (where you’re just changing the interest rate or loan term without pulling cash out), lenders might be more flexible, often allowing LTVs up to 95% depending on the loan type and your credit profile.

It’s also worth noting that there’s a related term called CLTV, or Combined Loan-to-Value ratio. This comes into play when you have more than one loan tied to the same property, like a second mortgage or a home equity line of credit (HELOC). CLTV adds all of your outstanding loan balances together and compares them to your home’s value. So if you’re thinking about tapping into your equity with a second loan, lenders will look at your CLTV to determine if you qualify.

Different types of loans have different LTV limits, too. For example, conventional loans typically require you to stay at or below 97% LTV to qualify, and anything above 80% will come with PMI. FHA loans allow LTVs up to 96.5% but require mortgage insurance for a longer period. VA and USDA loans are a bit more flexible—they can go up to 100% LTV with no down payment required, but those programs come with their own eligibility rules and fees. If you’re unsure where you stand, talking with a licensed mortgage loan originator can help clarify your options based on your LTV.

So how do you improve your LTV? The simplest way is by making a larger down payment when you buy a home. The more money you put down, the lower your LTV—and the less risk the lender sees. If you’re refinancing, paying down your existing loan or waiting for your home’s value to increase can have the same effect. Even a small improvement in your LTV can potentially lower your interest rate or eliminate the need for mortgage insurance, which can add up to real savings over time.

In the end, your LTV isn’t just another number—it’s a reflection of your financial position in the loan and a key factor in how your mortgage is structured. Whether you’re buying your first home or considering a refinance, understanding how LTV works can help you make more informed decisions and potentially save money in the long run. And if you’re not quite sure what your LTV is or how it impacts your situation, that’s a conversation worth having with an experienced lender who can break it down for you.