When applying for a home equity loan, one of the key terms you’ll hear is LTV ratio—short for Loan-to-Value. It’s more than just finance jargon; this simple percentage can directly impact your borrowing power, interest rate, and even whether your loan gets approved.
At Calgary Equity Loans, we believe that informed homeowners make better financial decisions. So let’s break down what an LTV ratio is, how it works, why it matters, and how it affects your ability to borrow against your home equity.
Understanding LTV: The Basics
LTV stands for Loan-to-Value ratio. It measures the relationship between the amount of your mortgage (or loan) and the appraised value of your property.
LTV Formula:
LTV Ratio = (Loan Amount ÷ Appraised Home Value) x 100
Example:
If your home is worth $500,000 and you owe $300,000 on your first mortgage:
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Your LTV is: ($300,000 ÷ $500,000) × 100 = 60%
This means you still have 40% equity in your home.
Why Does the LTV Ratio Matter?
Lenders use the LTV ratio to evaluate risk. A lower LTV means you have more equity in your home—less risk for the lender and better loan terms for you. A higher LTV suggests you’re borrowing close to your home’s value, which could trigger stricter lending criteria or higher interest rates.
Here’s what your LTV ratio tells a lender:
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Under 65%: Low risk. You may qualify for the best interest rates and larger loan amounts.
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65–80%: Moderate risk. Still good equity, but lenders may limit the loan size.
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Above 80%: Higher risk. Some traditional lenders might not approve a loan without mortgage insurance, but alternative lenders—like Calgary Equity Loans—can often help.
LTV in a Home Equity Loan Context
A home equity loan allows you to borrow against the value you’ve built in your home. Your LTV helps determine how much equity you can access.
Let’s say your home is worth $600,000 and you still owe $360,000 on your mortgage. That puts your LTV at 60%. This means you could potentially access up to 20%–25% more of your home’s value through a second mortgage or home equity loan, depending on the lender’s maximum LTV limits.
At Calgary Equity Loans, we often work with homeowners who:
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Have less-than-perfect credit
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Don’t qualify with big banks
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Need fast, flexible solutions
We assess the value of your property and your remaining equity, rather than relying solely on credit scores.
Home Equity Loan vs. HELOC: How LTV Plays a Role
Both Home Equity Loans and Home Equity Lines of Credit (HELOCs) use your LTV to determine eligibility and loan size, but there are some key differences:
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A Home Equity Loan is a lump-sum loan with a fixed rate and term. Lenders often cap LTV at 80%–85%.
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A HELOC is a revolving credit line. While flexible, it’s usually harder to qualify for with high LTV ratios, especially through banks.
With both products, the more equity you have, the better your borrowing position.
How to Improve Your LTV Ratio
Improving your LTV isn’t always quick, but it’s possible with the right strategy. Here are a few ways to lower your LTV and increase your borrowing power:
1. Increase Your Property Value
Renovations that boost home value—like updating kitchens or bathrooms—can improve your LTV by increasing the denominator in the equation.
2. Pay Down Your Mortgage
The more you reduce your principal balance, the more equity you build—improving your LTV over time.
3. Make a Larger Down Payment
If you’re considering a home purchase or refinancing, a larger upfront payment reduces your initial LTV and opens more borrowing options later.
LTV vs. CLTV: What’s the Difference?
You may also hear the term CLTV, or Combined Loan-to-Value. This takes into account all loans secured by the property—not just the primary mortgage.
Example:
If you owe $350,000 on your first mortgage and want a $50,000 home equity loan on a $500,000 home:
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Combined debt: $350,000 + $50,000 = $400,000
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CLTV: ($400,000 ÷ $500,000) × 100 = 80%
Lenders will often assess both LTV and CLTV to make informed decisions. At Calgary Equity Loans, we’re experienced in navigating both, offering solutions even when traditional lenders can’t.
What’s a Good LTV Ratio for a Home Equity Loan?
While every lender has different guidelines, here’s a general breakdown:
| LTV Ratio | What It Means | Loan Likelihood |
|---|---|---|
| Under 65% | Excellent equity | Very high |
| 65% – 75% | Strong equity | High |
| 76% – 85% | Acceptable equity | Possible with alternative lenders |
| Over 85% | Limited equity | May still qualify with Calgary Equity Loans |
How Calgary Equity Loans Looks at LTV
We know life doesn’t fit into a bank’s checklist. That’s why our approach to LTV is flexible and personalized. We take time to understand your full picture:
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The value of your home
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Your remaining mortgage balance
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The amount you need
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Your ability to repay
Our goal is to offer realistic loan options that fit your needs—not just your numbers.
Key Takeaways
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LTV ratio is a critical factor in home equity loan approval and loan amount.
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The lower your LTV, the more equity you have, and the better your loan terms.
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Alternative lenders can offer home equity loans even with higher LTVs or poor credit.
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Improving your LTV involves increasing home value or paying down your mortgage.
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At Calgary Equity Loans, we provide fast approvals—even if your LTV isn’t perfect.
Need a Home Equity Loan? Let’s Talk.
Understanding your LTV ratio is the first step in tapping into your home equity. Whether you’re looking to consolidate debt, cover major expenses, or start something new, a home equity loan could be your best option.
At Calgary Equity Loans, we work with real people—not just applications. Let’s figure out what’s possible for your situation.
