LTV

Loan-to-Value (LTV) Ratio: The Loan-to-Value (LTV) ratio is a financial metric that lenders use to assess risk when providing a mortgage or loan for a real estate property. It compares the amount of a loan to the value or selling price of a property.

The LTV ratio is calculated by dividing the mortgage amount by the appraised value of the property. A higher LTV ratio indicates a higher risk for the lender because it means that the borrower has less equity in the property.

For example, if a borrower is seeking a mortgage of $200,000 for a property valued at $250,000, the LTV ratio would be 80% ($200,000 / $250,000).

LTV is a key factor that lenders consider when determining whether to approve a loan application, what interest rate to offer, and whether mortgage insurance will be required. Typically, loans with a LTV ratio above 80% may require the borrower to purchase mortgage insurance to offset the lender's risk.