1. What is Loan-To-Value (LTV) Ratio?

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. It's commonly used in mortgage lending to assess the risk of a loan.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The amount of money being borrowed
• Property Value — The appraised value or purchase price of the property

Explanation: The LTV ratio compares the amount of the loan to the value of the property. A higher LTV ratio indicates more risk for the lender.

3. Importance of LTV Ratio

Details: LTV ratio is crucial in determining loan approval, interest rates, and whether mortgage insurance is required. Lower LTV ratios generally mean better loan terms.

4. Using the Calculator

Tips: Enter the loan amount and property value in dollars (or your local currency). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Generally, an LTV of 80% or lower is considered good. Above 80% may require private mortgage insurance (PMI).

Q2: How does LTV affect mortgage rates?
A: Lower LTV ratios typically qualify for better interest rates as they represent less risk to the lender.

Q3: Can LTV be more than 100%?
A: Yes, if the loan amount exceeds the property value, indicating negative equity.

Q4: How is LTV used in refinancing?
A: LTV determines refinancing eligibility and terms. Lower LTV ratios may qualify for better refinance options.

Q5: Does LTV affect home equity loans?
A: Yes, combined LTV (including all loans on the property) determines eligibility and terms for home equity products.