After evaluating your short and long term plans & determining that you would like to further investigate refinancing your home; you will need to consider whether there is sufficient equity in your home to qualify for a refinance.  In mortgage jargon, we use the expression “Loan To Value” or “LTV” to express the new loan amount as a percentage of the appraised value of the property.  For example, in a scenario with a $160,000 loan amount & a property that appraises at $200,000 you would calculate your LTV =  $160,000 / $200,000 = 80%.  

An 80% LTV means your loan amount is 80% of the value of your home.  We use LTVs in mortgage banking to measure the amount of equity remaining in the property once the loan is completed.  In the example above, an LTV of 80% means that you have 20% equity remaining in the property once the refinance is completed.  Lenders and government agencies set limits on the maximum LTVs allowable for different types of loan programs.  

Some loan programs require more equity than others, ie. cash-out refinances require more remaining equity than a no rate/term refinances.   Other programs may have no equity requirement at all, ie. HARP, FHA Streamline, VA IRRRL.  Below is a summary of the maximum LTVs for the most common types of refinances.

Refinance Table of Max LTVs By Loan Type

• Conventional Mortgage – Rate/Term Refinance LTV Limits
  • Primary Residence = 97% LTV
  • Second Home = 90% LTV
  • Investment Property = 85% LTV
• Conventional Mortgage – Cash-Out Refinance LTV Limits
  • Primary Residence = 80% LTV
  • Second Home = 75% LTV
  • Investment Property = 75% LTV
• Conventional HARP Refinance = Unlimited LTV
• FHA Streamline Refinance - No Appraisal = Unlimited LTV
  • FHA Streamline Refinances with no appraisal are available for Primary Residence, Second Home, and Investment Properties
• FHA Streamline Refinance - With Appraisal = 97.75% LTV
• FHA Refinance (Full Credit Qualifying)  = 96.5%
• FHA Cash-Out Refinance = 85% LTV
• VA IRRRL No-Cash Out Refinance = Unlimited LTV
  • VA IRRRL Refinances with no appraisal are available for eligible Primary Residence, Second Home, and Investment Properties
• VA Cash-Out Refinance = 100% LTV
• USDA Rate/Term Refinance = 100% LTV
• USDA Cash-Out Refinance = Not Eligible for Cash-Out