Loan-to-Value Ratio (LTV)

The loan-to-value ratio (LTV) is the size of your mortgage expressed as a percentage of the property's value. If you buy a home for $500,000 with a $100,000 down payment and a $400,000 mortgage, your LTV is 80%. The lender divides the mortgage amount by the lesser of the purchase price or the appraised value, so a low appraisal can raise your LTV even when the agreed price has not changed.

Why LTV Matters in Canada

LTV drives three things: whether you need mortgage default insurance, how much that insurance costs, and how lenders price your rate. A mortgage with an LTV above 80% is a high-ratio mortgage and must be insured by CMHC, Sagen, or Canada Guaranty. At or below 80%, the mortgage is conventional and insurance is not typically required. Because insurance premiums are calculated on the mortgage amount, a higher LTV generally means a larger premium, and those premiums are often added to the mortgage balance, which raises the LTV slightly again.

LTV, Down Payments, and Rules

Below 20% down payment: LTV above 80%, insurance required.
20% or more down: LTV at or below 80%, conventional financing.
Refinances and HELOCs: lenders usually cap total borrowing at 80% LTV, and some products go higher only with insurance.

Federal rules also apply a stress test to insured borrowers and to many uninsured ones, which means you must qualify at a higher rate than your contract rate regardless of LTV. See the mortgage stress test calculator for how that changes the numbers. Lenders still assess GDS and TDS ratios, so a comfortable LTV does not guarantee approval on its own.

Reading LTV in Practice

A lower LTV usually means more of your own money is at risk, better rate pricing, and more room to absorb a price decline before you owe more than the home is worth. A higher LTV stretches your savings but can get you into a home sooner. Lenders confirm value with an appraisal, and the resulting figure, not the listing price, is what they generally use. Down payment sources, including the Home Buyers' Plan, can affect what you can put toward the purchase and therefore your LTV.

Frequently asked questions

What is a good loan-to-value ratio in Canada?

Many buyers aim for an LTV of 80% or lower because that avoids mortgage default insurance and can come with better rate pricing. Some lenders also prefer lower LTVs on refinances and home equity products. There is no single "good" number, since it depends on your savings, income stability, and how much risk you are comfortable carrying.

How is loan-to-value calculated for a refinance?

Lenders divide the total mortgage amount by the current appraised value of the home. If the property appraises for less than expected, the LTV rises and the available equity shrinks. Refinances are commonly capped at 80% LTV, though insured and some specialty programs may allow more. Confirm current limits with your lender.

Does a high LTV affect my mortgage rate?

It can. Lenders often price mortgages above 80% LTV differently because they carry more risk, and default insurance premiums apply. Insured mortgages can sometimes receive competitive pricing because the lender's risk is reduced. Compare offers and ask how LTV is treated in each quote.