What CLTV means
Loan-to-value, or LTV, compares one loan to your home's value. Combined loan-to-value, or CLTV, adds up all the loans secured by the home: your first mortgage, any home equity loan, and any home equity line of credit. Then it compares that total to the value.
Lenders use CLTV to see how much equity would be left if you borrowed more. More equity means less risk for the lender, and often better terms for you.
How to calculate it
Example: you owe $300,000 on your first mortgage and want a $60,000 home equity loan. Your home is worth $450,000. Your combined balance would be $360,000. Divide that by $450,000 and you get 0.80. Lenders often show that result as a percentage. Put simply, $90,000 of your home's value would still be equity after the new loan.
- Add up the balances of all loans on the home, including the new one.
- Divide by your home's current value.
- Subtract the combined balance from the value to see the equity you'd keep.
How much you might borrow
You can flip the formula to estimate your room to borrow. Start with the most a lender will let all your loans add up to, then subtract what you already owe. What's left is the most you could borrow, before credit and income come into it.
At CapCenter, the maximum depends on the loan type and purpose, and a loan consultant can tell you yours. CapCenter home equity loans run from $50,000 to $250,000 and are available on single-family primary residences and second homes. Your actual amount also depends on your credit, your income and the home's value.
Three examples on a $500,000 home
These show how the math works. They're illustrations, not offers, and your limit may differ.
- $300,000 owed: a combined balance of $300,000 on a $500,000 home, with $200,000 of equity. The most room of the three.
- $380,000 owed: $380,000 on a $500,000 home, with $120,000 of equity. Less room, but a loan may still fit.
- $430,000 owed: $430,000 on a $500,000 home, with $70,000 of equity. Room may be tight, and what's left could fall below a lender's minimum loan size.
CLTV vs. HCLTV
If you already have a home equity line of credit, some lenders use HCLTV. It counts the full credit limit of the line, not just what you've drawn. A $100,000 line with $20,000 drawn can count as $100,000. Lowering or closing an unused line can raise how much you can borrow elsewhere.
Which value lenders use
Your CLTV is only as accurate as the value behind it. Lenders may use an appraisal or an automated valuation model, depending on the loan. For CapCenter home equity loans, an appraisal isn't required in most cases. We typically use automated valuation models to estimate your home's value.
How to lower your CLTV
- Pay down your first mortgage or other home loans.
- Borrow a smaller amount.
- Pay off or reduce the limit on a home equity line you don't use.
- Make improvements or wait for your home's value to grow.
Home equity loan or cash-out refinance?
A home equity loan keeps your first mortgage and its rate, and adds a second fixed-rate loan. A cash-out refinance replaces your mortgage with one larger loan, so lenders look at a single loan-to-value instead of a combined one. Both come with ZERO Closing Costs at CapCenter (restrictions apply). Which fits depends on how your current rate compares with today's rates.
