Loan-to-Value Ratio (LTV)
Learn what the loan-to-value (LTV) ratio is in Canadian real estate, how it affects mortgage insurance, and why it matters to both lenders and buyers.
May 22, 2025
What is Loan-to-Value Ratio (LTV)?
The Loan-to-Value Ratio (LTV) is a measure of how much of a property's value is being financed by a mortgage, expressed as a percentage.
Why Loan-to-Value Ratio (LTV) Matters in Real Estate
In Canadian real estate, LTV helps lenders assess risk when approving a mortgage. A lower LTV means the buyer has more equity, which reduces lender exposure.
LTV formula: LTV = (Mortgage Amount ÷ Appraised Property Value) × 100
LTV benchmarks include:- 80% or lower: typically doesn’t require mortgage insurance
- Above 80%: usually requires CMHC or other mortgage default insurance
LTV also affects interest rates, insurance premiums, and approval conditions. Reducing LTV through a larger down payment can lead to better mortgage terms.
Understanding LTV is essential for evaluating affordability, reducing borrowing costs, and planning long-term equity growth.
Example of Loan-to-Value Ratio (LTV) in Action
A buyer puts down $100,000 on a $500,000 home. Their mortgage is $400,000, giving them an LTV of 80%.
Key Takeaways
- Shows what portion of the property is financed.
- Lower LTV means less lender risk.
- Impacts insurance and approval.
- Affects rate and terms.
- Key factor in mortgage planning.
Related Terms
- Down Payment
- Mortgage Insurance
- CMHC Insurance
- Home Equity
- Refinance
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)
