What is HTLTV and HCLTV?
HTLTV is an acronym for “high total loan to value.” HTLTV is a comparison between your home’s value and the total amount of credit available on the home. For instance, a home worth $100,000 with an $80,000 first mortgage and a $10,000 unused line of credit would have an HTLTV of 90%.
HTLTV is also known as HCLTV, or high combined loan to value, and will play a role in determining your refinance eligibility.
Your mortgage HTLTV ratio may be higher than your loan-to-value (LTV) ratio and total loan-to-value (TLTV) ratio since it takes into account any borrowable funds you have access to.
So even if you haven’t borrowed all available funds in your line of credit, your HTLTV is going to equal the total amount you can borrow.
Understanding what HTLTV is and how it affects you are important steps to take before refinancing.Check your home buying eligibility. Start here (Dec 9th, 2023)
Why does my lender say I have an HTLTV?
An HTLTV takes into account all available funds in all of your mortgages. If you took out a second mortgage in the form of a line of credit (LOC), your HTLTV ratio could be different than your LTV or TLTV ratio.
When applying for a refinance, your lender is going to want to look at all the funds you have available to borrow. Your HTLTV will represent the total funds available to you even if you haven’t borrowed that amount.
Having an HTLTV is not a bad thing. It means you have flexibility to pull more of your home’s equity at will for home improvement projects or even to go on vacation.
However, having a high HTLTV can affect your refinance. But in some cases it can be fairly easy to reduce.
Also, depending on your situation, your HTLTV may not affect your refinance eligibility at all.
What is the difference between LTV, TLTV and HTLTV?
The LTV is the percentage of your appraised home value covered by your first mortgage. If you purchased a home with an appraised value of $100,000, your LTV depends on how much your mortgage is worth.
If you borrowed $80,000 and put $20,000 down, your LTV would be 80. If you opted for a Conventional 97 and put $3,000 down, your LTV would be 97.
Your TLTV, also know as combined loan-to-value or CLTV, adds your first mortgage and second mortgage LTVs together.
Using the same example as before, a second mortgage worth $15,000 with an LTV of 80 would raise your TLTV to 95. Even though your second mortgage may be small your lender will take both into account.
However, your second mortgage could be a line of credit, commonly knownas a HELOC. If this is the case, your HTLTV may be different than your TLTV. Your HELOC could be open-ended meaning that any funds you didn’t borrow originally are still available to you.
Your lender will assume that you will take those funds out eventually even if you have not or do not plan to.
If you only took out $10,000 of the available $15,000 from your second mortgage, your TLTV would be 90. However, your HTLTV would be 95 since it also takes into account any available funds.
How HTLTV affects a refinance
Your lender will assume that any available funds from an open-ended line of credit will be used even if you have no plans to draw out more funds.
So if you have money available in your HELOC, this can increase you HTLTV.
When applying for a refinance, your lender will notice that your HTLTV is higher than your LTV or TLTV. This can affect the rates that you can get, but also whether or not you are eligible for a refinance.
For instance, a lender may allow an HTLTV up to 95 percent. But, your line of credit would let you draw up to 100 percent of your home’s value in cash. Your HTLTV would make you ineligible for the new loan.
Making sure that you know your current HTLTV and taking steps to keep it low could help immensely when you apply to refinance.Check your home buying eligibility. Start here (Dec 9th, 2023)
What if my HTLTV is too high?
If your HTLTV is too high, you should look into lowering your ratio of available mortgage funds compared to house value.
Depending on your situation, you may have a number of different ways to lower it.
Reduce your line of credit
If you haven’t borrowed the maximum available amount from your HELOC, you can ask your lender to reduce maximum available limit.
You can have it reduced by an amount. — for example, if you have $10,000 available in your HELOC but will only want to borrow $5,000 in the future, you can opt to get your LOC lowered by $5,000. This will decrease your HTLTV proportionally.
Many lenders are willing to reduce your available credit without having to open a whole new line of credit.
Make your line of credit close-ended
By changing your line of credit from open-ended to close-ended, you will remove the possibility of borrowing available funds.
The lender will change your line of credit into a home equity loan, meaning your second mortgage will act more like a first mortgage. You can pay off the balance, but you can no longer pull money out and add to your balance. You will not have a “credit limit” available on your second mortgage, so your HTLTV will equal your TLTV
Make a payment on your LOC then reduce the maximum
If you have any additional funds, you should consider making a principal payment on your LOC. After your payment, you can reduce the maximum available limit on your LOC and consequently reduce your TLTV and HTLTV.
Current refinance rates
Mortgage rates have been falling throughout 2016 to ultra-low levels.
Low mortgage rates have been driving homeowner interest in refinancing. Today’s rates could be some of the lowest in the past year. Check your home buying eligibility. Start here (Dec 9th, 2023)