Loan To Value Ratio (LTV Ratio)
A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.
Calculated as:
Investopedia Says:
For example, Jim needs to borrow $92,500 to purchase a $100,000 property. The LTV ratio yields a value of about 92.5%. Since bankers usually require a ratio at a maximum of 75% for a mortgage to be approved, it may prove difficult for Jim to get a mortgage.
Similar to other lending risk assessment ratios, the LTV ratio is not comprehensive enough to be used as the only criteria in assessing mortgages. Related Terms:
Alt-A
Appraised Value
Combined Loan To Value Ratio - CLTV Ratio
Credit Rating
Gross Debt Service Ratio - GDS
House Poor
No-Ratio Mortgage
Silent Second Mortgage
Total Debt Service Ratio - TDS
Total Housing Expense |