LTV = loan amount ÷ property value × 100. Buy a $325,000 home with a $260,000 loan and your LTV is 80%, one-fifth of the property is equity. The ratio matters because it measures the lender's cushion: the lower the LTV, the more value stands between a defaulted loan and a loss.
How LTV moves without you doing anything
Two forces change LTV over time. Amortization retires principal every month. Value changes move the denominator, rising values push LTV down (more equity), falling values push it up. In a market downturn, borrowers can cross 100% LTV: negative equity, where the loan exceeds the value.
CLTV: the whole stack
If you add a home equity line or second mortgage, lenders assess combined LTV (CLTV): all loans over the same value. A 70% first mortgage plus a 15% HELOC is 85% CLTV, and many programs price or decline on CLTV, not the first lien alone.