This calculator helps you understand your Loan-to-Value (LTV) ratio for purchasing or refinancing a home in Canada. The LTV ratio is important to understand as it impacts the amount that you are able to borrow, in addition to potential mortgage default insurance.
What is Loan-to-Value (LTV)?
The loan-to-value ratio compares your loan amount as a percentage of the property’s value. This is a crucial ratio that lenders use to assess the risk associated with a mortgage. A loan-to-value ratio above 80% would be considered a high-ratio mortgage, which would require mortgage default insurance. These insurance premiums are based on the loan-to-value ratio. You can see how these are calculated with our mortgage default insurance calculator.
What is the formula for calculating loan-to-value?
You can calculate your loan-to-value with the following inputs:
- Property value
- Loan amount
Loan-to-Value (LTV) Ratio = (Loan Amount ÷ Property Value) × 100
For example, if you are purchasing a $500,000 home with a $400,000 mortgage, your LTV is:
$400,000 ÷ $500,000 × 100 = 80% LTV
What is a low-ratio mortgage?
A low-ratio mortgage or conventional mortgage is where the loan-to-value is 80% or less. This means that a total down payment of 20% or more has been put down on the property price. While a larger down payment allows you to avoid CMHC mortgage default insurance, purchasing insurance may provide you with access to a more favourable rate, as insured mortgages carry less risk for the lender.
LTV threshold table: what happens at each tier
Canadian mortgage lending is governed by specific LTV thresholds. Each tier triggers different requirements, rates, and product availability:
| LTV Ratio | Down Payment | Mortgage Insurance | Insurance Premium | Rate Impact | Products Available |
|---|---|---|---|---|---|
| 95% (max insured) | 5% | Required (CMHC/Sagan/Canada Guaranty) | 4.00% of mortgage | Insured rates (often lowest) | Purchase only; max 25-year amortization |
| 90% | 10% | Required | 3.10% of mortgage | Insured rates | Purchase only; max 25-year amortization |
| 85% | 15% | Required | 2.80% of mortgage | Insured rates | Purchase only; max 25-year amortization |
| 80% | 20% | Not required | N/A | Conventional rates | Purchase or refinance; up to 30-year amortization |
| 75% | 25% | Not required | N/A | May qualify for better rates | All products including some HELOCs |
| 65% | 35% | Not required | N/A | Best available rates | All products; standalone HELOC eligible |
Key thresholds to remember:
- Above 80% LTV: Mortgage default insurance is mandatory. The insurance premium (2.80% to 4.00%) is added to your mortgage balance.
- 80% LTV: The sweet spot — no insurance required. You can also access 30-year amortization periods and refinancing options.
- 65% LTV: Maximum for a standalone HELOC. At this level, you typically qualify for the lender’s best rates.
Minimum down payment rules in Canada
| Home Price | Minimum Down Payment | Maximum LTV |
|---|---|---|
| Up to $500,000 | 5% | 95% |
| $500,001 – $1,499,999 | 5% on first $500K + 10% on remainder | Varies (approximately 88%–95%) |
| $1,500,000 and above | 20% | 80% |
For example, on a $700,000 home: 5% of $500,000 ($25,000) + 10% of $200,000 ($20,000) = $45,000 minimum down payment, resulting in a 93.6% LTV.
How LTV changes over time
Your LTV ratio improves as you pay down your mortgage and as your property potentially appreciates in value. Here is an example of how LTV changes over time on a $500,000 home with a $400,000 mortgage at 5.00% over 25 years:
| Year | Mortgage Balance | Home Value (2% annual appreciation) | LTV Ratio |
|---|---|---|---|
| 0 (purchase) | $400,000 | $500,000 | 80.0% |
| 3 | ~$373,000 | ~$530,600 | ~70.3% |
| 5 | ~$355,000 | ~$552,000 | ~64.3% |
| 10 | ~$301,000 | ~$609,500 | ~49.4% |
| 15 | ~$232,000 | ~$672,700 | ~34.5% |
| 20 | ~$146,000 | ~$742,500 | ~19.7% |
| 25 | $0 | ~$819,600 | 0% |
This table illustrates two important points: regular mortgage payments steadily reduce your balance, and even modest property appreciation significantly improves your LTV over time. Making extra mortgage payments accelerates this process.
LTV for refinancing
If you want to refinance your mortgage, the maximum LTV allowed is 80%. This means you must have at least 20% equity in your home to refinance. For example:
- Home value: $600,000
- Maximum refinanced mortgage: $600,000 × 80% = $480,000
- Current mortgage balance: $350,000
- Maximum cash-out available: $480,000 − $350,000 = $130,000
This cash-out amount can be used for renovations, debt consolidation, or other purposes. Use our mortgage refinance calculator to evaluate whether refinancing makes financial sense for your situation.
LTV for HELOCs
Home Equity Lines of Credit have specific LTV rules set by federal regulations:
- Standalone HELOC: Maximum LTV of 65%
- HELOC combined with mortgage: Total cannot exceed 80% LTV
Example: HELOC calculation
- Home value: $600,000
- Current mortgage balance: $300,000 (50% LTV)
- Maximum combined LTV: 80% = $480,000
- Available for HELOC: $480,000 − $300,000 = $180,000
- But standalone HELOC max is 65%: $600,000 × 65% = $390,000
- HELOC limit: The lesser of $180,000 (combined rule) and $390,000 (standalone rule) = $180,000
If your mortgage balance were only $50,000, the standalone HELOC cap of 65% ($390,000) would apply before the combined 80% limit. Use our HELOC calculator to estimate your borrowing power.
Why LTV ratio matters
Your loan-to-value ratio is one of the most important numbers in a Canadian mortgage application. Lenders use specific LTV thresholds to determine your requirements:
- Insurance requirements — LTV above 80% triggers mandatory mortgage default insurance, adding a premium of 2.8% to 4% to your mortgage balance
- Rate pricing — Many lenders offer better rates at lower LTV tiers, particularly at 65% and below
- Product availability — Higher LTV restricts your options (maximum 25-year amortization, no refinancing, limited HELOC access)
- Risk assessment — A lower LTV means more equity cushion, which makes you a lower-risk borrower
How to improve your LTV
There are two primary ways to lower your LTV ratio: increase your down payment or reduce your mortgage balance. Saving for a larger down payment before purchasing lets you avoid mortgage insurance and may qualify you for better rates. If you already own a home, making extra mortgage payments, lump-sum prepayments, or choosing accelerated payment frequencies will reduce your outstanding balance faster, improving your LTV over time. As your home appreciates in value, your LTV also improves naturally. Understanding your LTV alongside your overall mortgage details helps you make smarter borrowing decisions and potentially save thousands over the life of your loan.
Related calculators
- Mortgage Insurance Calculator — Estimate CMHC insurance premiums at your LTV
- Mortgage Calculator — Calculate your regular mortgage payments
- Mortgage Down Payment Calculator — Plan the right down payment amount
- Mortgage Calculator With Extra Payments — See how extra payments reduce your LTV faster
- HELOC Calculator — Estimate your home equity line of credit borrowing power
- Mortgage Refinance Calculator — Explore refinancing at 80% LTV or below
- Mortgage Affordability Calculator — Determine how much home you can afford