How Does a Loan-to-Value Ratio Get Calculated?
What Does Loan to Value Mean There are many mortgage products on the market today. Each product has its own loan to value limit on it. Depending on the money a person has for a down payment, the mortgage officer will try to fit her into a program that will accommodate her. The meaning of loan to value is the ratio between the amount of the loan someone is requesting and the value of the property for which the loan is requested. Calculating Loan to Value Let’s say Bob sees a house he wants to buy that has an appraisal for $100,000. He applies for a mortgage and the program with the best rate has an 80 percent LTV. Multiply the $100,000 times the 80 percent and the maximum loan allowed would be $80,000. This would mean that Bob needs $20,000 for his down payment. If Bob only has $10,000 for a down payment he would need a program with a 90 percent LTV, likely a higher interest rate and private mortgage insurance. Whenever you borrow more than 80 percent of the value you will pay a mortgag
