1. What is Loan To Value (LTV)?

The Loan To Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. In mortgage lending, it represents the percentage of the home's value that is being borrowed.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• \( Loan\ Amount \) — The amount being borrowed
• \( Home\ Value \) — The appraised value or purchase price of the home

Explanation: The equation calculates what percentage of the home's value is being financed by the loan.

3. Importance of LTV Calculation

Details: LTV is a key metric lenders use to assess risk. Lower LTV ratios generally mean better loan terms and lower interest rates. Most conventional loans require LTV below 80% to avoid private mortgage insurance (PMI).

4. Using the Calculator

Tips: Enter the loan amount and home value in dollars. Both values must be positive numbers. The calculator will compute the LTV percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Generally, an LTV of 80% or lower is considered good, as it typically avoids PMI requirements and may qualify for better interest rates.

Q2: How does LTV affect mortgage approval?
A: Higher LTV ratios (above 80%) may require PMI and can make loan approval more difficult. Lenders view higher LTV loans as higher risk.

Q3: Can LTV change after closing?
A: Yes, LTV can change if the home's value changes (through appreciation or depreciation) or if you pay down the principal balance.

Q4: What's the maximum LTV for different loan types?
A: Conventional loans typically max at 97% LTV, FHA loans at 96.5%, and VA loans at 100% (for eligible borrowers).

Q5: How can I lower my LTV?
A: You can lower LTV by making a larger down payment, choosing a less expensive home, or waiting for home values to appreciate.