A lower loan-to-value (LTV) ratio can unlock better mortgage terms, lower interest rates, and reduced insurance costs. If your ratio is too high, lenders may see you as risky. Learning how to lower your LTV ratio puts you in control of your borrowing power. This guide explains why LTV matters and five of the most effective strategies to bring it down.

What is an LTV ratio?

The loan-to-value (LTV) ratio is the percentage of your mortgage compared to the appraised value of your home. It’s a key number lenders use to determine your eligibility for a mortgage, refinance, or home equity loan.

For example, if your home is valued at $300,000 and your loan balance is $240,000, your LTV ratio is 80%. That means you owe 80% of the home’s value and own 20% in equity. 

You can do the math to find out your own LTV ratio, or you can use our calculator. 

The lower your LTV ratio, the less risk you represent to lenders. A higher LTV signals less equity and more reliance on borrowed funds.

Why a lower LTV ratio matters

Before we explore ways to lower your LTV ratio, it helps to understand why it’s so important.

• Loan approval: A high LTV can make it harder to qualify for loans or refinancing.
• Interest rates: Borrowers with lower LTV ratios usually get better interest rates.
• Mortgage insurance: Conventional loans with an LTV above 80% require private mortgage insurance (PMI), adding to your monthly cost.
• Equity access: A lower LTV ratio means you have more equity, which you can use for home equity loans or lines of credit.

Reducing your LTV ratio can make a big difference in affordability and financial flexibility.

5 ways to lower your LTV ratio

There are multiple strategies you can use to lower your LTV ratio. Some are immediate, while others take time. Let’s break down the most effective options.

#1: Make a larger down payment

The fastest way to lower your LTV ratio at the time of purchase is by making a bigger down payment. For example, on a $400,000 home, a $40,000 down payment results in a 90% LTV. Increasing your down payment to $80,000 drops the ratio to 80%.

A bigger down payment means:

• Lower monthly payments
• Reduced risk in the eyes of lenders
• Avoiding or shortening the time you’ll pay mortgage insurance

If you haven’t purchased a home yet, saving for a larger down payment is the most direct strategy.

#2: Pay down your mortgage faster

If you already own your home, the most effective way to lower your LTV ratio is by reducing the loan balance. Every extra dollar you put toward principal shrinks the ratio.

• Make extra monthly payments: Even small additional payments can add up.
• Apply windfalls: Bonuses, tax refunds, or inheritances can be applied directly to your mortgage principal.
• Switch to biweekly payments: Paying half your mortgage every two weeks adds one extra full payment per year, lowering your balance faster.

Not only does this lower your LTV ratio, but it also reduces the total interest paid over the life of the loan.

#3: Improve your home’s value

Another way to lower your LTV ratio is by increasing the denominator in the LTV equation: your home’s appraised value. If your home is worth more, your LTV automatically decreases — even if your loan balance stays the same.

• Renovations: Upgrades like kitchen remodels, bathroom improvements, or energy-efficient systems often boost appraised value.
• Curb appeal: Landscaping, fresh paint, and exterior updates can make a big difference.
• Regular maintenance: Keeping your property in top condition protects and may even increase its value.

For example, if your home’s value rises from $300,000 to $330,000 and your loan balance is $240,000, your LTV drops from 80% to about 73%.

#4: Refinance strategically

Refinancing can help lower your LTV ratio in two ways:

1. Cash-in refinance: You bring cash to closing to pay down the loan balance, instantly reducing your LTV.
2. Switching loan types: Some government-backed loans allow higher LTV ratios, giving you more flexibility if you can’t reach 80% yet.

While refinancing doesn’t change your LTV ratio by itself, pairing it with a lump-sum payment can get you into a better financial position.

#5: Wait for natural appreciation

Sometimes, lowering your LTV ratio simply takes patience. Over time, real estate markets tend to appreciate, meaning your home’s value rises. As your loan balance decreases and your property value increases, your LTV improves naturally.

While this strategy isn’t as immediate as paying down your mortgage or making improvements, it’s a realistic long-term approach. Just keep in mind that housing markets fluctuate, so appreciation isn’t guaranteed.

Common LTV thresholds to keep in mind

As you work to lower your LTV ratio, aim for these key benchmarks:

• 90% or less: May qualify you for refinancing options with reasonable terms.
• 80% or less: The magic number for avoiding private mortgage insurance on conventional loans.
• 70% or less: Often unlocks the best interest rates available.
• 60% or less: Gives you maximum borrowing power for home equity loans and cash-out refinances.

Knowing these thresholds helps you set clear goals as you work toward lowering your ratio.

Mistakes to avoid when lowering your LTV

While the strategies above are effective, there are some pitfalls to avoid:

• Over-investing in renovations: Not all home improvements yield a dollar-for-dollar increase in value.
• Ignoring PMI cancellation: Once your LTV drops below 80%, request PMI removal from your lender.
• Tying up all cash in the home: While paying down the mortgage is smart, it’s also important to maintain savings for emergencies.

The key is balance: reduce your LTV ratio while maintaining financial stability elsewhere.

Ready to take the next step?

Learning how to lower your LTV ratio is one of the smartest moves you can make as a homeowner. Whether you boost your down payment, make extra principal payments, improve your property’s value, or simply wait for appreciation, every step lowers your borrowing risk and strengthens your financial future.

The result? Better loan terms, reduced costs, and more equity in your home.

At Rates.Now, we help you explore mortgage options that align with your financial goals. Whether you’re buying, refinancing, or planning improvements to lower your LTV ratio, our tools make it easy to compare lenders and find the best path forward.

Start comparing mortgage rates today at Rates.Now.

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