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. In mortgage lending, it represents the percentage of the property value that's being financed by the 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 size of the loan to the value of the property, expressed as a percentage.

3. Importance of LTV Calculation

Details: LTV is a key metric lenders use to assess risk. Lower LTV ratios generally mean better loan terms, while higher ratios may require private mortgage insurance (PMI).

4. Using the Calculator

Tips: Enter the loan amount and property 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, 80% or lower is considered good as it typically avoids PMI requirements. Conventional loans often require ≤80% LTV for the best rates.

Q2: How does LTV affect mortgage approval?
A: Higher LTV ratios (above 80%) may result in higher interest rates or require PMI. Very high LTVs (above 95%) may be harder to qualify for.

Q3: Can LTV change over time?
A: Yes, as you pay down the principal or if the property value changes (through appreciation or depreciation).

Q4: What's the maximum LTV for different loan types?
A: Conventional loans typically max at 97%, FHA at 96.5%, and VA loans at 100%. Jumbo loans often have stricter LTV requirements.

Q5: How can I lower my LTV ratio?
A: By making a larger down payment, choosing a less expensive property, or waiting for property values to increase.