Definition
– Combined loan-to-value (CLTV) is the total of all outstanding loans secured by a property divided by the property’s current value, expressed as a percentage. It measures how much of a home’s value is encumbered by liens when more than one loan exists.
Formula
– CLTV = (Sum of all loan amounts on the property) / (Property value)
– As a percentage: CLTV% = [(Loan1 + Loan2 + … + LoanN) / Property value] × 100
Step-by-step calculation
1. List every secured loan tied to the property (first mortgage, second mortgage, home equity loan, outstanding HELOC balance, etc.).
2. Add their current balances.
3. Use the most recent realistic value for the property (purchase price or an appraisal/market estimate).
4. Divide the total loan balance by the property value and multiply by 100 to get a percentage.
Worked numeric example
– Home purchase price (or appraised value): $200,000
– First mortgage balance: $100,000
– Second mortgage balance: $50,000
– Sum of loans = $100,000 + $50,000 = $150,000
– CLTV = $150,000 / $200,000 = 0.75 → CLTV = 75%
What CLTV tells lenders
– CLTV indicates how much equity a borrower has after accounting for all liens. A lower CLTV implies more owner equity and less lender exposure in the event of default. Lenders combine CLTV with other metrics (credit score, debt-to-income ratio, standalone LTV) to decide whether to lend and on what terms.
Loan-to-value (LTV) vs. CLTV
– LTV (loan-to-value) usually refers only to the primary mortgage balance divided by property value.
– CLTV includes every secured loan on the property. Example: you can have a low LTV on the first mortgage but a much higher CLTV if you also carry a second lien.
Which loans are included
– First mortgages
– Second mortgages and junior liens
– Home equity loans
– Outstanding HELOC balances
– Any other recorded liens secured by the property
How CLTV affects rates, PMI, and eligibility
– Higher CLTVs mean higher risk to lenders; that often leads to higher interest rates and stricter underwriting.
– Private mortgage insurance (PMI) is typically required when the first-lien LTV exceeds conventional thresholds (commonly 80%), even if CLTV is similar or higher. Whether a lender requires PMI depends on the primary loan’s LTV and the lender’s policies.
– Some lenders set maximums for CLTV; exceeding those caps can make a borrower ineligible or push them into higher-cost loan products.
What is a “good” CLTV?
– Many lenders prefer CLTVs of 80% or lower for conventional financing when the borrower has strong credit. Acceptable CLTVs can be higher for borrowers with excellent profiles or for government-backed programs, but higher CLTVs generally increase cost and reduce options.
Special considerations and historical context
– In the 2000s housing boom, lenders often loosened CLTV and LTV limits. Buyers combined multiple loans to avoid down payments, which raised overall household leverage. When prices fell, losses and foreclosures increased—illustrating why aggregate leverage (CLTV) matters.
– In a foreclosure, lien priority determines payout order: first mortgage holders are paid before junior lien holders. If sale proceeds are insufficient, junior lenders may not be fully repaid.
Quick checklist for borrowers (before applying or adding a lien)
– Calculate your current CLTV (include all liens and realistic property value).
– Check your primary loan’s LTV to see if PMI may apply.
– Compare the cost of a second mortgage vs. paying PMI.
– Ask lenders about their maximum CLTV limits and rate tiers.
– Consider how a higher CLTV affects refinancing or future home equity borrowing.
Final practical tip
– If you plan to borrow more against your home, re-evaluate both the CLTV and the priority of liens to understand how much equity remains and how that affects costs and risk.
Sources
– Investopedia — Combined Loan-to-Value (CLTV): https://www.investopedia.com/terms/c/combinedloantovalue.asp
– Consumer Financial Protection Bureau (CFPB) — Mortgages and homeownership basics: https://www.consumerfinance.gov/
– Federal Housing Finance Agency (FHFA) — Housing finance terms and data: https://www.fhfa.gov
Educational disclaimer
This explainer is for general information and educational purposes only. It does not constitute personalized financial, tax, or legal advice. Consult a licensed professional before making decisions about loans or mortgages.