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LTV is the loan amount divided by the property's appraised value or purchase price, expressed as a percentage. It tells lenders how much equity cushion exists in the deal — a lower LTV means more owner equity and less lender risk.

At 80% LTV or below, conventional lenders typically waive private mortgage insurance (PMI) because the equity cushion is considered enough to protect them if you default. Crossing above 80% LTV usually triggers a PMI requirement until you pay the balance down.

Lenders use the lower of the two figures. If the appraisal comes in below the purchase price, your LTV is calculated against the (lower) appraised value, which can mean you need extra cash to keep your intended LTV, since the loan amount is capped relative to that lower number.

On a refinance, LTV is calculated using your current mortgage balance (or new requested loan amount) against the home's current appraised value, not what you originally paid. Home value changes since purchase, up or down, directly move your refinance LTV.

Yes — this means you owe more than the home is worth, often called being underwater, and it typically results from a market value decline, a very low down payment, or a cash-out refinance. Most lenders won't approve new loans above 100% LTV without a special program.