What is LTV (Loan To Value)?
Loan to Value (LTV) is the term used to define the financial position of the borrower, after the available deposit has been offset against the total of the mortgage loan. In simple mathematical terms, the calculation is as follows: LTV = the total amount required by the borrower, divided by the actual price of the property x 100. To use a comprehensible example: Where the outright cost of the property is £100,000, and the available deposit amounts to £10,000, the LTV will be £90,000 or 90%. Primarily the LTV calculation is a formula for assessing the risk factor when lenders consider applications for mortgage finance. The premise of this assessment is that the risk to the lender increases proportionately as the amount of equity (the actual cash value of the property, less the amount of outstanding loan) decreases. Often the risk factor of high LTV loans may be reduced by an insistence on the part of the lender that applicants take up mortgage insurance, thereby protecting against defau
