What is combined loan-to-value ratio (CLTV), and why should homeowners care?

Core Insights - Homeowners have likely gained equity in their properties due to rising home prices, which positively impacts their financial standing and ability to qualify for additional loans [1] Combined Loan-to-Value (CLTV) Ratio - The CLTV ratio compares total debt owed on a home, including primary mortgage and other secured loans, to the home's value, with a lower ratio indicating less risk to lenders [2][4] - A CLTV ratio above 85% can lead to loan application denials, as lenders view it as a high-risk scenario [3][8] - The calculation of CLTV involves summing all loan balances against the home, determining the home's market value, and dividing the total debt by the home's value [9][10] Importance of CLTV - CLTV affects loan approval chances and interest rates; a high CLTV can result in higher APRs or loan denials [7][8] - Many lenders accept CLTV ratios up to 80% or 85%, with lower ratios increasing the likelihood of approval and better interest rates [16] Strategies to Manage CLTV - Homeowners can lower their CLTV by increasing property value through maintenance and upgrades, paying down existing debt, borrowing less on new loans, or improving credit scores [15][17]