Can You Refinance With a High Loan-to-Value Ratio?

23 June 2025

Refinancing your mortgage can be a great way to lower your monthly payments, secure a better interest rate, or even tap into your home’s equity. But what if your loan-to-value (LTV) ratio is high? Does that mean refinancing is off the table? Not necessarily!

In this article, we’ll break down everything you need to know about refinancing with a high LTV ratio, including what it means, why lenders care about it, and what your options are.

What is a Loan-to-Value (LTV) Ratio?

Before we dive into refinancing, let’s talk about LTV. Loan-to-value ratio is a simple formula that compares the amount you owe on your mortgage to the current value of your home.

How to Calculate LTV

LTV is calculated like this:

\[
LTV = \left(\frac{ ext{Loan Balance}}{ ext{Home Value}}\right) imes 100
\]

For example, if your home is worth $300,000 and you owe $270,000:

\[
LTV = \left(\frac{270,000}{300,000}\right) imes 100 = 90\%
\]

A high LTV ratio means you have little equity in your home. Typically, lenders prefer an LTV under 80% because it represents less risk. But if yours is higher, don’t lose hope—there are still ways to refinance.

Why Does LTV Matter in Refinancing?

Lenders use LTV to assess risk. The higher the LTV, the bigger the risk for the lender. Why? Because if you default on your loan and your home’s value drops, the lender might not recover the full amount they lent you.

Generally, a high LTV can:

- Make it harder to qualify for refinancing
- Result in higher interest rates
- Require private mortgage insurance (PMI)

But that doesn’t mean you’re out of options. Let’s take a look at some loan programs that cater to borrowers with high LTV ratios.

Refinancing Options for High LTV Homeowners

Even with a high LTV ratio, you may still be able to refinance. Here are a few loan programs designed to help homeowners in your situation.

1. Fannie Mae’s High LTV Refinance Option (HIRO)

HIRO is designed for homeowners who have little to no equity in their homes. If your mortgage is backed by Fannie Mae and you’ve been making on-time payments, this could be a great option.

Key Features:

✔ No maximum LTV ratio for fixed-rate mortgages
✔ No appraisal required in some cases
✔ Lower monthly payments with improved interest rates

2. Freddie Mac’s Enhanced Relief Refinance (FMERR)

Like HIRO, FMERR helps homeowners who are “underwater” on their mortgages (owe more than their home’s worth).

Key Features:

✔ No set maximum LTV for fixed-rate loans
✔ Reduced documentation requirements
✔ Can help lower interest rates and payments

3. FHA Streamline Refinance

If you have an FHA loan, refinancing with the FHA Streamline Refinance program can be a breeze. Since it doesn't require a new home appraisal, high LTV borrowers can still qualify.

Key Features:

✔ No home appraisal required
✔ Easier credit and income requirements
✔ Faster closing process

4. VA Interest Rate Reduction Refinance Loan (IRRRL)

For veterans and active military members with a VA loan, the IRRRL offers one of the easiest ways to refinance—even with a high LTV.

Key Features:

✔ No need for an appraisal or credit check (in many cases)
✔ No out-of-pocket costs (can roll fees into the loan)
✔ Lower monthly payments with better interest rates

5. USDA Streamline Assist Refinance

If you have a USDA loan, the USDA Streamline Assist Refinance could be your ticket to lower payments. This program is specifically designed to help rural homeowners refinance with minimal hassle.

Key Features:

✔ No home appraisal required
✔ No credit check in most cases
✔ Must show at least a $50 reduction in monthly payments

What If You Don’t Qualify for These Programs?

If you don’t qualify for the special programs listed above, don’t worry. Here are some other strategies you can try:

Improve Your Credit Score

A higher credit score can improve your chances of refinancing, even with a high LTV. Focus on paying down debt, making on-time payments, and avoiding major credit purchases before you apply.

Pay Down Your Mortgage

If possible, make extra payments to reduce your loan balance. Even small additional payments can help lower your LTV over time.

Increase Your Home’s Value

Consider making home improvements that could boost your home’s market value. A higher home appraisal could lower your LTV and make refinancing easier.

Look Into a Home Equity Loan or Line of Credit (HELOC)

If refinancing isn’t an option, a home equity loan or line of credit could help you tap into your home's value for things like debt consolidation or home improvements.

Common Misconceptions About High LTV Refinancing

There are a lot of myths floating around about refinancing with a high LTV ratio, so let’s clear some of them up.

Myth #1: You Can’t Refinance If Your LTV is Over 80%

Not true! While many conventional lenders prefer LTVs under 80%, there are government-backed programs specifically designed for high LTV borrowers.

Myth #2: You’ll Automatically Get Stuck With PMI

While private mortgage insurance (PMI) is typically required for high LTV loans, certain refinancing programs (like VA and FHA loans) don’t require PMI at all.

Myth #3: Refinancing Will Always Lower Your Interest Rate

Not necessarily. If mortgage rates have risen since you first took out your loan, refinancing might not save you money. Always compare rates before making a decision.

Myth #4: You Have to Wait Until You Have More Equity

With programs like HIRO, FMERR, and FHA streamline refinancing, you don’t have to wait until your home gains more equity. Even homeowners with an LTV over 100% may be eligible.

Final Thoughts

Refinancing with a high loan-to-value ratio can be tricky, but it’s not impossible. Thanks to programs like HIRO, FMERR, FHA Streamline, and VA IRRRL, borrowers with little equity still have options.

Even if you don’t qualify for these programs, improving your credit score, making extra payments, and boosting your home’s value can help you secure a better loan in the future.

At the end of the day, the best move is to evaluate your personal situation, explore all available loan programs, and talk to a trusted lender who can guide you in the right direction.

So, can you refinance with a high LTV ratio? Absolutely—if you play your cards right.