What is Combined Loan to Value CLTV in Mortgage Lending?

Buying a home often involves more than just one loan, and keeping track of your total borrowing against your property's value is critical. That's where Combined Loan to Value (CLTV) comes into play - it's a key metric that both lenders and borrowers need to understand.

Combined Loan to Value (CLTV): The total amount of all mortgage loans on a property compared to its appraised value or purchase price, expressed as a percentage. For example, if a home has a first mortgage of $150,000 and a second mortgage of $50,000 on a property worth $250,000, the CLTV would be 80%.

Breaking Down CLTV Components

Your CLTV ratio includes several types of loans that might be secured by your property. First mortgages make up the primary loan used to purchase your home. Second mortgages are additional loans taken out against your property's equity. Home Equity Lines of Credit (HELOCs) offer flexible borrowing options using your home's equity as collateral. Other liens and loans might include tax liens or home improvement loans.

Calculating CLTV

The basic formula for CLTV is straightforward:

CLTV = (Total of All Loans / Property Value) x 100

Let's look at a real example:

Property Value: $400,000

First Mortgage: $300,000

HELOC: $40,000

CLTV = ($340,000 / $400,000) x 100 = 85%

Common mistakes include forgetting to include all loans or using outdated property values. Many online calculators can help you determine your CLTV accurately.

CLTV vs. Other Important Ratios

While CLTV looks at all loans against your property, Loan-to-Value (LTV) only considers your primary mortgage. Debt-to-Income (DTI) measures your monthly debt payments against your income. Each ratio serves a different purpose in the lending process.

CLTV Limits and Guidelines

Different loan types have varying CLTV limits:

• Conventional loans typically max out at 80-95% CLTV

• FHA loans might allow up to 96.5% CLTV

• VA loans sometimes permit 100% CLTV

• Jumbo loans often require lower CLTVs

• Investment properties face stricter CLTV limits

Impact of CLTV

Your CLTV ratio affects several aspects of your mortgage:

• Higher CLTVs might make loan approval harder

• Lower CLTVs often mean better interest rates

• CLTVs over 80% usually require private mortgage insurance

• Your CLTV impacts your refinancing options

Strategies for Managing CLTV

You can improve your CLTV by:

• Making a larger down payment on your home purchase

• Waiting for your home's value to increase

• Paying down your existing loans faster

• Looking for refinancing opportunities when your home's value increases

Common Questions About CLTV

• Q: What's the highest CLTV I can have? A: It depends on your loan type and lender, but conventional loans typically max out at 95%.

• Q: Does CLTV affect my credit score? A: CLTV itself isn't a factor in credit scores, but the loans that make up your CLTV do impact your credit.

• Q: How does owning multiple properties affect CLTV? A: Each property has its own CLTV calculation, but lenders look at your total exposure when considering new loans.

Tips for Home Buyers and Current Homeowners

Monitor your CLTV regularly, especially if you're planning to borrow more against your home. Keep an eye on local property values and market trends that might affect your home's worth. If you have multiple mortgages, create a strategy to pay them down systematically.

Next Steps

Understanding CLTV helps you make smart decisions about home financing. Bellhaven Real Estate's team can guide you through the complexities of mortgage lending and help you find the right financing solution for your needs. Whether you're buying your first home or managing multiple properties, we're here to support your real estate goals.