What is 100% LTV (Loan-to-Value ratio) home equity loan?


A 100% LTV (Loan-to-Value ratio) home equity loan is in fact a junior lien on the property. Actually, talking about 100% LTV home equity loan one is talking about combined LTV, first (and perhaps a second) mortgage or existing home equity loan, and the remaining equity.

What is combined Loan-To-Value and why is CLTV important when taking a HELOAN or HELOC, or even a second mortgage?

Imagine that you have a house worth $250,000. If you have a first mortgage of $100,000 and no second mortgage and no home equity installment loans, and your lender allows up to 80% CLTV this means that you are allowed to borrow up home equity loan amount for up to 80% of the property value. In this case, your HEL or HELOC amount is calculated the following way:

CLTV X Property Value - First Mortgage = 80% x $250,000 - $100,000 = $100,000

You will be allowed to take out up to $100,000 minus any loan costs and fees.

Now, what happens if you have more than one loan, using your house as collateral?

Imagine that beside your first mortgage you also have a $30K HELOC (home equity line of credit) and your lender allows 100% CLTV.

The formula is:

CLTV x Property Value - First Mortgage - HELOC = $250,000 - $100,000 - $30,000 = $120,000.

With allowed 100% CLTV, your house worth $250,000 and combined mortgage debt of $130,000 you can take out up to $120,000 home equity loan(HEL)/second mortgage/HELOC.

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