The combined loan-to-value (CLTV) ratio is a metric used to measure the risk profile of an individual or institution. The CLTV ratio assesses potential borrowers and their ability to meet repayment obligations and determine if lenders must accept loan applications.

The concept of combined loan-to-value ratio has existed since before the start of the 20th century. It has become increasingly popular with changes in economic policies worldwide. Understanding what CLTV means, how it’s measured, and how best to manage your relationship between debt and collateral helps you make sounder choices when dealing with money matters.

Having control over one’s financial situation provides peace of mind and security. Knowing where you stand financially allows individuals to plan more confidently while minimizing risks associated with leaving oneself vulnerable through overextension or not adequately preparing for unforeseen events like job loss or medical bills. People are empowered to manage their finances better responsibly and make informed decisions regarding credit accessibility and usage with appropriate knowledge about CLTV ratios.


  • The Combined Loan-to-Value (CLTV) ratio measures the risk profile of an individual or institution by dividing the total amount of outstanding loans by the value of assets that secure them.
  • CLTV ratios are used to assess potential borrowers, determine loan applications and make informed decisions about financial matters.
  • A higher CLTV ratio indicates more significant risk and debt from lenders, decreasing available equity in case of default on payments.
  • The CLTV ratio is calculated by dividing the amount borrowed by the appraised property value expressed as a percentage.
  • Strategies to improve CLTV ratios include making larger down payments, eliminating debts, and assessing all elements in calculating CLTV ratios.

Definition Of Combined Loan-To-Value Ratio

The combined loan-to-value ratio is a financial term that reflects the relationship between the total amount of loans taken out against an asset and its estimated value. The ratio helps provides insight into how much capital has been borrowed against a property or other collateral, such as stocks, to fund a purchase.

The combined loan-to-value (CLTV) ratio measures the percentage of funds lenders provide compared to borrowers’ offers for asset purchasing. CLTV is calculated by adding all the support-related mortgages and dividing them by their estimated market value. The result gives investors a quick indication of risk level since more money from lenders suggests less available equity in case of default on payments. High values reveal how leveraged one’s position must change certain conditions drastically and provide information about a potential vulnerability regarding investment worthiness. Understanding the concept of CLTV becomes increasingly necessary when evaluating any financing decision involving multiple debt funding sources.

How Is The Combined Loan-To-Value Ratio Calculated?

The combined loan-to-value (CLTV) ratio is needed to know a borrower’s best outcome. CLTV ratios are used by financial institutions when assessing loan applications and determining if or not to lend money.

An LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage, according to Investopedia. For example, if you buy a home appraised at $100,000 for its appraised value and make a $10,000 down payment, you borrow $90,000, which results in an LTV ratio of 90% (i.e., 90,000/100,000).

Here is a table showing different scenarios that offer different combinations of the appraised value, borrowed amount, down payment, and LTV ratio.

ScenarioAppraised ValueAmount BorrowedDown PaymentLTV Ratio
Scenario 1$200,000$160,000$40,00080%
Scenario 2$500,000$450,000$50,00090%
Scenario 3$300,000$270,000$30,00090%
Scenario 4$150,000$120,000$30,00080%
Scenario 5$1,000,000$900,000$100,00090%

The LTV ratio in each scenario is calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage. The scenarios show different combinations of the appraised value, borrowed amount, and down payment, resulting in different LTV ratios.

How to Improve Combined Loan-to-Value Ratio?

Make larger down payments to reduce overall borrowing costs and increase property equity immediately to improve one’s CLTV ratio and work towards eliminating debts like credit card debt and car loans so that more funds become available as down payments or closing costs associated with purchasing a home. Borrowers can make informed decisions regarding financing their purchases, allowing them to properly assess their options before deciding on a lender or type of loan that borrowers want to pursue by following the strategies and considering all elements involved in calculating CLTV ratios.

What Is A Good Loan-To-Value Ratio?

The combined loan-to-value ratio (CLTV) is a necessary factor when it comes to obtaining an approved loan. The CLTV provides significant benefits that assist borrowers in getting accepted and receiving better mortgage terms. It is necessary to understand what makes a good CLTV and how lenders use it when determining if borrowers approve or deny a loan application.

A good LTV to aim for is around 80% or lower, according to RocketMortgage. Maintaining the numbers helps improve the odds of extending a preferred loan option with better rates attached.

What is the Impact Of the Combined Loan-To-Value Ratio?

The combined loan-to-value ratio (CLTV) is one of the most necessary factors in determining a borrower’s eligibility for mortgage financing. CLTV measures how much debt is being taken on against the value of the collateral that backs it up, such as a home or other property. The impact ratio has far-reaching effects for both lenders and borrowers alike.

Listed below is the impact of the combined loan-to-value ratio.

  • Financial Planning Possibilities
    Borrowers can financially plan (or re-plan) ahead more effectively as certain parts of their life change, such as income level, jobs, or family obligations, happen over time by combining different loans into one. Extra funds available from refinancing allow more significant investment opportunities such as stocks/shares, real estate projects, etc.
  • Less Stress & Hassle
    Customers have far less hassle managing multiple payments at once or are faced with defaulting late notices or fees per failure in payment scenarios frequently occurring with adjustable rate mortgages (ARM).
  • Expanded Funding Sources
    A larger combined loan has access to funds from multiple sources and lenders, giving customers more flexibility when paying off their debts, such as making principal payments on top of what is owed each month or transferring funds from asset accounts into savings accounts.
  • Risk Mitigation
    Combining multiple loans into one allows you to spread risk over a more extended period, resulting in lower overall interest rates since lenders offer shorter-term loans at higher rates due to increased risk. It helps you pay less long-term interest average costs and secure better tax benefits from deductions.
  • Improved Credit Scores
    Lower debt levels contribute to better credit scores while increasing your borrowing capacity in the long run. Taking a combined loan must potentially reduce overall debt and increase one’s payment history, two necessary factors when borrowing heavily in future financial decisions.
  • More Funding Options
    Combining two loans into one opens up more funding options for individuals who don’t qualify for a traditional loan from their bank or credit union. Combining loans reduce the cost of borrowing and open up different financing products that were never available.
  • Lower Monthly Payments
    You get more favorable terms on your loan if you can borrow a more significant sum and the debt-to-income ratio does not exceed the lender’s guidelines, which means lower monthly payments that free up your budget for other expenses.

How To Improve Combined Loan-to-Value Ratio?

Improving the combined loan-to-value (CLTV) ratio is necessary because it affects your ability to obtain financing, the cost of borrowing money, and your overall financial health. CLTV is the ratio of the total amount of outstanding loans secured by a property to the property’s appraised value. A higher CLTV ratio indicates a greater risk for lenders because the property has less equity and less protection against default. Pay down your mortgage balance, refinance your mortgage, and increase your home value to improve the combined loan-to-value ratio.

Listed below are the ways how to improve the combined loan-to-value ratio.

  1. Pay Down Your Mortgage Balance.
    The simplest and most effective way to decrease your combined loan-to-value ratio is to pay down the balance of your mortgage. Check with your lender first to know if any extra payments are applied directly to the principal balance.
  2. Refinance Your Mortgage.
    Another way to reduce your combined loan-to-value ratio is to refinance into a lower-rate and longer-term loan if you don’t want or can’t afford to make larger payments on your mortgage. It works because as you spread out payments over more years, your monthly payments drop, and so do your total borrowed amounts relative to the value of your home. It’s necessary to fully understand all aspects of refinancing before committing.
  3. Increase Your Home Value.
    Another way to improve your CLTV is by increasing the value of your property compared with what you owe in loans against it. The improvements increase property values above what was initially paid for if you improve appearance or functionality via remodels or additions like second stories or decks.

Here are some statistics about Combined Loan-To-Value Ratio:

Average CLTV ratio for mortgages in the United States73.5%
Highest CLTV ratioFHA loans, 96.12%
Lowest CLTV ratioConventional loans, 62%
CLTV ratio required for conventional loans80% or lower
The borrower has no equity in their home90% or higher
CLTV ratio of 100%Borrower has no equity in their home
Statistics about Combined Loan-To-Value Ratio

What are the Benefits Of A Low Combined Loan-to-Value Ratio?

A low Combined Loan-to-Value (CLTV) ratio has several benefits for borrowers. A lower CLTV ratio means that the borrower has more equity in their assets, which makes them a lower risk for lenders. Borrowers with a low CLTV ratio are more likely to be approved for loans and can secure better interest rates and loan terms. A low CLTV ratio gives borrowers more financial flexibility. A low CLTV ratio gives borrowers greater peace of mind, knowing that CLTV has a lower debt than their assets’ value. Maintaining a low CLTV ratio help borrowers improve their financial standing, reduce their debt burden, and achieve their financial goals more easily.

Combined loan to value ratio stats

Listed below are the benefits of a low combined loan-to-value ratio.

  • Lower Interest Rates
    A low combined loan-to-value ratio leads to lower interest rates because lenders feel more comfortable that their loan is secured by sufficient collateral and that there is a reduced risk of default. Lower interest rates are enticing, especially in long-term loans, because they save you thousands in payments over the repayment period.
  • More Loan Options
    A lower CLTV ratio grants you access to a broader pool of loan options than if it were higher, as lenders are more likely to approve your application due to the reduced risk taken on with the loan. Loan options such as mortgage or car loans are much easier to get approved with a low CLTV than a high one, and you even qualify for certain loan types that aren’t available if your CLTV needs improvement.
  • Improved Credit Score
    Credit scores increase if your debt levels decrease. A low combined loan-to-value ratio means that less overall debt is attached to it improving your credit score drastically over time if improved correctly.
  • Equity Increase
    A lower combined loan-to-value ratio provides an advantage due to equity growth in one of two ways paying off excess debt or waiting until home values rise enough to offset or outweigh any outstanding mortgage balances (making you “collateral rich”). 
  • Tax Benefits
    Low combined ratios grant preferential tax benefits depending on where you live, which add significant savings to the household budget, making homeownership financially accessible and benefiting society running smoothly wide economically driven markets worldwide.
  • Home Ownership Opportunities
    Having a low combined loan-to-value ratio increases one’s opportunities in buying homes and investing in properties (such as rental properties) without sizeable amounts of cash upfront amounting from saved funds or inheritance.


The combined loan-to-value (CLTV) ratio is a financial term used to determine the relationship between the total amount of loans taken against an asset and its estimated value. It is a necessary calculation for both lenders and borrowers as it helps assess an individual’s or institution’s risk profile, determine if lenders must accept loan applications, and assist borrowers in making informed decisions regarding financing their purchases. Borrowers can take steps such as making larger down payments and eliminating debts like credit cards and car loans. A good CLTV ratio to aim for is around 80% or lower.

Understanding CLTV ratios empower individuals to manage their finances better responsibly, make informed decisions regarding credit accessibility and usage, and minimize risks associated with overextension or not adequately preparing for unforeseen events.

Frequently Asked Questions

What is the Combined Loan-to-Value Ratio (CLTV), and how does it differ from Loan-to-Value (LTV) in real estate financing?

CLTV measures total borrowing against the property value, including additional liens beyond the first mortgage. LTV only considers the first mortgage relative to value. CLTV gives a complete picture.

How is the CLTV ratio calculated, and why is it an important factor for lenders when assessing mortgage applications?

CLTV is calculated by dividing the sum of all loans by the property’s value. It indicates total indebtedness on a property, which is key for lenders assessing risk.

What are the typical CLTV ratio limits for various types of loans, and how do these limits affect borrowers and lenders?

Limits are typically 80-90% for first mortgages, and 125-150% for refinances including a second lien. Higher CLTVs mean greater risk for lenders, and less equity and borrowing power for homeowners.

Can you explain the impact of a high CLTV ratio on mortgage interest rates and the overall cost of borrowing for homeowners?

A high CLTV ratio results in higher interest rates and costs for homeowners because there is less equity buffering the lender’s risk, requiring greater compensation.

In what ways does the CLTV ratio influence a borrower’s ability to refinance their mortgage or obtain a home equity line of credit (HELOC)?

Higher CLTV ratios reduce chances of approval for refinancing or HELOCs. Lenders require sufficient equity to provide additional financing above existing liens.

My Name is Jay has and I have a passion for financial writing. I am the chief writer on this blog. I do my best to verify all the information but if there is anything amiss please let me know and I will do my best to correct it.