1. What is Loan To Value (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. In mortgage lending, it represents the percentage of the property's value that is being financed by the loan.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The amount being borrowed (USD)
• Property Value — The appraised value of the property (USD)

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 crucial in mortgage lending as it helps lenders assess risk. Lower LTV ratios generally mean better loan terms and interest rates. Most conventional loans require LTV ratios of 80% or less to avoid private mortgage insurance (PMI).

4. Using the Calculator

Tips: Enter the loan amount and property value in USD. Both values must be positive numbers. The calculator will compute the LTV ratio as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Generally, an LTV of 80% or lower is considered good as it may qualify you for better rates and avoid PMI. Higher LTVs (up to 97% for some loans) are possible but come with stricter requirements.

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

Q3: Can LTV exceed 100%?
A: Yes, if the loan amount exceeds the property value (known as being "underwater" or "upside-down" on a mortgage), but most lenders won't approve loans with LTV over 100%.

Q4: How is property value determined?
A: Lenders typically use the lower of the purchase price or appraised value when calculating LTV for purchase loans.

Q5: Does LTV change over time?
A: Yes, as you pay down your mortgage and/or as the property value changes, your LTV ratio will change accordingly.