Mortgage LTV vs. CLTV: What's the Difference?

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The loan to value (LTV) ratio of a mortgage is the ratio of the mortgage balance to the value of the property, while the combined loan to value (CLTV) is the same calculation made for the sum of all loans taken out on the property. LTV and CLTV ratios are both used in mortgage lending to determine whether a borrower is qualified to obtain a home loan.

The Difference Between LTV and CLTV

Loan to value is the ratio of your first mortgage balance to your home value, while combined loan to value is the same ratio but with all your other home loans added into the calculation. If you have any second mortgages, home equity loans or lines of credit that depend on your property as collateral, those balances will be factored into the CLTV. The CLTV ratio for your mortgage will always be equal to or greater than your LTV ratio. As a result, mortgage lenders have higher maximum limits for CLTV compared to the LTV ratio.

How to Calculate LTV and CLTV

Calculating LTV has much to do with the down payment on your mortgage loan. Since your LTV is equal to the borrowed amount divided by the total home price, it's the mirror opposite of the down payment. For instance, a $200,000 home bought with a down payment of 20% requires a mortgage loan of $160,000. Dividing that loan amount by the value gives us a LTV ratio of 80% —the portion of your home value not covered by the 20% down payment.

Calculating LTV

Outstanding mortgage balance$160,000
Sales price or appraised value of your home$200,000
Loan balance divided by value = LTV80%

You can figure out the combined loan to value ratio in a similar way. According to Fannie Mae's guidelines on CLTV calculation for conventional mortgages, you must add the loan amount of your first mortgage to the amounts you have outstanding in your secondary mortgages, home equity loans and home equity lines of credit (HELOCs). For HELOCs, the CLTV takes into account the amount you have drawn so far on the line of credit. Once you add these numbers, you must divide the total by the lesser of two values: either the sales price of your home or its appraised value.

Calculating CLTV

First mortgage balance$90,000
Second mortgage balance$70,000
Drawn balance on HELOC$5,000
Sum of all loans and lines of credit$165,000
Lesser of home sales price or appraised value$200,000
Sum of loans divided by value = CLTV82.5%

As an example, consider our $200,000 home. Instead of a single mortgage of $160,000, we have a first mortgage of $90,000, a secondary mortgage of $70,000 and a HELOC that we've used to access $5,000 so far. Since the same home is being used to guarantee all three, we add the outstanding balances together and divide by $200,000 for a CLTV ratio of 82.5%.

If the appraised value of your home decreases after you purchase it, your CLTV would use that smaller number and thus go up. This will only matter if you decide to refinance at a later date, since lenders and appraisers only get involved when the borrower applies for a new mortgage arrangement.

Why Does CLTV Matter to Your Mortgage?

Mortgage lenders use CLTV to evaluate situations in which an applicant has more than one mortgage on their property. Since LTV only describes your first mortgage, lenders need CLTV to calculate the risk for a borrower with multiple liens on his or her home. This is because some people choose to reduce their down payment by funding it with money from a second mortgage. This results in a lower LTV on the first mortgage, which is needed to avoid the added expense of private mortgage insurance. If you plan on applying for more than one mortgage, lenders will look at both the LTV and CLTV of your planned home purchase.

Note that certain home loan products at Fannie Mae or Freddie Mac also look at HCLTV, which is the home equity combined loan to value ratio. This includes the full amount of your HELOCs rather than just the amount that you have withdrawn. As a result, your HCLTV ratio is always higher than your CLTV —and lenders often consider just the highest value among LTV, CLTV and HCLTV. If you use a HELOC to help finance your home purchase, then you may find it somewhat harder to get approved for a refinance later on.

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