1. What is Loan-to-Value Ratio (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. 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 represents what percentage of the property's value is being financed by the loan.

3. Importance of LTV Calculation

Details: LTV is a key metric lenders use to evaluate risk. Lower LTV ratios generally mean less risk for the lender and may result in better loan terms for the borrower.

4. Using the Calculator

Tips: Enter the loan amount and property value in dollars. 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, the LTV will be over 100%, indicating negative equity.

Q4: How is LTV used in refinancing?
A: LTV helps determine if you qualify for refinancing and what terms you'll receive. Lower LTV ratios generally get better terms.

Q5: Does LTV affect loan approval?
A: Yes, most lenders have maximum LTV limits for different loan programs. Higher LTV ratios may make approval more difficult.