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What is the Loan-To-Value Ratio?

April 26, 2017loan-to-value ratio

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What is the Loan-To-Value Ratio?

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The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is assumed to be the purchase price, for refinances the value is determined by an appraisal.

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The SBA requires a 10% down payment on a real estate loan. In essence, the SBA is making a business loan secured by real estate rather than a classic real estate loan. Therefore, the emphasis is on business cash flow, earnings, balance sheet and management capabilities, not Loan to Value.