Understanding Combined Loan-to-Value (CLTV): What You Need to Know

Apr 20, 2024

When it comes to understanding mortgage financing, one key term that often comes up is Combined Loan-to-Value (CLTV). CLTV is a crucial metric used by lenders to assess the risk of a borrower and the value of the property being financed. Let's dive into what CLTV is all about and why it's important for anyone looking to secure a mortgage.

What is Combined Loan-to-Value (CLTV)?

CLTV is a ratio that represents the total amount of outstanding loans on a property compared to its appraised value. It takes into account all loans secured by the property, including the primary mortgage as well as any secondary mortgages or home equity loans.

Calculating CLTV

To calculate CLTV, you simply add up the total loan amounts secured by the property and divide it by the appraised value of the property. The result is expressed as a percentage. For example, if a property has a first mortgage of $150,000 and a home equity loan of $50,000 on an appraised value of $250,000, the CLTV would be 80% ($200,000 divided by $250,000).

Why CLTV Matters

Understanding CLTV is important for both lenders and borrowers. Lenders use CLTV to assess the risk of a loan and determine the maximum amount they are willing to lend. A higher CLTV ratio indicates higher risk for the lender, as it means the borrower has less equity in the property.

mortgage property

Factors Impacting CLTV

Several factors can impact the CLTV ratio, including the down payment amount, the current market value of the property, and any additional loans or liens on the property. Borrowers with a lower CLTV ratio are generally seen as less risky by lenders, making it easier to qualify for a loan with favorable terms.

Managing CLTV

For borrowers looking to improve their CLTV ratio, there are a few strategies that can be employed. Making a larger down payment, paying down existing debts, or increasing the value of the property through renovations can all help lower the CLTV ratio and improve loan terms.


It's important not to confuse CLTV with Loan-to-Value (LTV). While both ratios assess the relationship between the loan amount and the property value, LTV only considers the primary mortgage amount, whereas CLTV includes all loans secured by the property.

home equity loan

Final Thoughts

Understanding CLTV is crucial for anyone looking to secure a mortgage or refinance their existing loans. By knowing how CLTV is calculated and the factors that impact it, borrowers can position themselves for better loan terms and a smoother approval process. Remember, a lower CLTV ratio is generally more favorable, so it's worth exploring ways to improve this metric if you're in the market for a new loan.