Qualifying
Loan-to-value (LTV)
The mortgage as a percentage of the property's value, which decides your insurance, your pricing tier and how much you can borrow.
Also called LTV.
LTV is the mortgage amount divided by the lower of the purchase price and the appraised value. A $400,000 mortgage on a $500,000 home is 80% LTV.
Almost every rule in Canadian mortgage lending is set as an LTV limit. Above 80%, the mortgage must be default-insured. A refinance is capped at 80%. A standalone HELOC is capped at 65%, or 80% combined with an amortizing portion. Insurance premium bands step at 80%, 85%, 90% and 95%.
Because the ratio uses the lower of price and appraised value, a low appraisal raises your LTV. That can push you into a more expensive band or out of a product entirely.
Moving across an LTV threshold is often worth more than shopping for a better rate. The difference between 80.5% and 79.9% can be a whole pricing tier.
Related terms
Mortgage default insurance
Insurance that protects the lender if you default, required with less than 20% down and paid for by you.
Appraisal
A lender-ordered opinion of a property's market value, used to confirm the loan-to-value ratio before funding.
Equity
The difference between what your home is worth and what you still owe on it.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
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