1. What is Loan To Value 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:

• \( Loan \) — The amount of money borrowed
• \( Value \) — The appraised value 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 Calculation

Details: Lenders use LTV to determine loan eligibility, interest rates, and whether mortgage insurance is required. Lower LTV ratios generally qualify for better loan terms.

4. Using the Calculator

Tips: Enter the loan amount and property value in dollars. Both values must be positive numbers to calculate a valid LTV ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Typically, lenders prefer LTV ratios of 80% or less. Above 80% usually requires private mortgage insurance (PMI).

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

Q3: Can LTV be more than 100%?
A: Yes, this means the loan amount exceeds the property value (underwater mortgage).

Q4: How can I lower my LTV ratio?
A: By making a larger down payment, paying down the principal, or if the property value increases.

Q5: Is LTV the same as combined LTV (CLTV)?
A: No, CLTV includes all liens on the property (like second mortgages or HELOCs) while LTV only considers the primary mortgage.