LTV
Loan-to-Value ratio
Definition
Loan-to-value ratio: your mortgage balance divided by the property's value (the lower of purchase price or appraised value on a purchase).
80% LTV means 20% equity. Insured purchases can go up to 95% LTV on homes of $500,000 or less; above that, the 10% down-payment tier lowers the maximum.
LTV is the lender's shorthand for risk: the more equity you hold (lower LTV), the less they stand to lose, so the better your pricing and options. A $400,000 mortgage on a $500,000 home is 80% LTV.
Key LTV ceilings: up to 95% on an insured purchase (less above $500,000 because of the down-payment tiers); 80% for any conventional mortgage, refinance, or mortgage-plus-HELOC combination at a federally regulated lender; and 65% for the revolving HELOC portion. Mortgage default insurance premiums also step up at each LTV band (65%, 75%, 80%, 85%, 90%).
Because LTV is based on appraised value, a strong appraisal can lower your LTV and unlock a better tier, and a weak one can push you the other way.
Worked example
Illustrative: an $800,000 purchase with the minimum down payment of $55,000 (5% of $500,000 = $25,000, plus 10% of $300,000 = $30,000). Loan $745,000 ÷ $800,000 = 93.1% LTV, before the insurance premium is added.
Refinance: on a home appraised at $850,000, 80% LTV caps total mortgage debt at $680,000.
Illustrative figures only, rounded; not a quote or current rate. See today’s rates on our live board.
Sources
- How much you need for a down payment (Financial Consumer Agency of Canada)
- Guideline B-20: Residential Mortgage Underwriting Practices and Procedures (OSFI)
- CMHC mortgage loan insurance cost (CMHC)
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