In a refinancing scenario, what is essential to qualify for an 80% loan-to-value (LTV) ratio?

To qualify for an 80% loan-to-value (LTV) ratio in a refinancing scenario, obtaining a home appraisal is essential. The LTV ratio is calculated by dividing the loan amount by the appraised value of the property. Therefore, an accurate appraisal is crucial because it determines the property's current market value, which directly impacts the LTV calculation.

If the appraised value of the home is lower than expected, it could result in a higher LTV, potentially exceeding the 80% threshold, which might disqualify the borrower from securing the desired loan amount without additional equity. Conversely, a higher appraisal may allow the borrower to take advantage of lower LTV opportunities, offering better loan terms. This emphasis on the appraisal highlights its importance in establishing equity and ensuring the loan structure aligns with lender guidelines.