What is a Loan to Value Ratio?
The loan-to-value (LTV) ratio is a mathematical calculation that expresses the amount of a loan as a percentage of the total appraised value of the real property. For instance, if a borrower wants $130,000 to purchase a house worth $150,000, the LTV ratio is calculated as follows: $130,000 / $150,000 = 87%.
Loan to value (LTV) ratio is a term frequently used in relation to mortgages. It is a ratio that involves the loan amount and the value of the property for which someone has applied for a mortgage. This ratio is calculated by dividing the mortgage amount by the amount for which the property has been appraised. Loan to value ratios are typically expressed as percentages. For example, if a person wants to borrow $75,000 US Dollars (USD) for a property with an appraised value of $85,000 USD, the loan to value ratio is 88.23 percent. Likewise, if a person needs to borrow $50,000 USD to purchase a property that has an appraised value of $75,000 USD, the loan to value ratio would be about 66 percent. When lenders consider loaning mortgage money, they typically consider the loan to value ratio in making their decisions; a lower home to value ratio is considered optimal. This is because higher loan to value ratios translate into more risk for the lending company. In such a situation, the borro
