Combined Loan-to-Value (“CLTV”) is a mortgage lending ratio used to measure the total amount of debt secured by a property compared to the property’s appraised value or purchase price, whichever is lower. Unlike the standard Loan-to-Value (“LTV”) ratio, which considers only the primary mortgage loan, CLTV includes all secured financing on the property, such as a first mortgage, second mortgage, home equity loan, or Home Equity Line of Credit (“HELOC”). The ratio is calculated by dividing the combined balances of all secured loans by the property value and expressing the result as a percentage. Lenders use CLTV to evaluate overall borrower leverage and assess the level of risk associated with a mortgage transaction.
For Mortgage Loan Originators (“MLOs”), CLTV is significant because it directly affects loan eligibility, underwriting decisions, interest rates, mortgage insurance requirements, and available financing options. Higher CLTV ratios generally indicate greater lending risk because the borrower has less equity in the property. Many loan programs establish maximum CLTV limits that borrowers must meet to qualify for financing, particularly when secondary financing is involved. MLOs must accurately calculate and disclose CLTV ratios when structuring mortgage transactions and advising borrowers about loan products. Incorrect CLTV calculations or failure to properly account for subordinate financing can lead to underwriting issues, compliance concerns, or loan denial.
