Learn what a loan-to-value ratio is and why it is important to mortgage lenders when processing a mortgage. Find out why LTV matters and how it can impact your chances of getting a mortgage.
The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of the asset. The LTV ratio is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always the real driver of underwriting and, ultimately, lending approval decisions, and the likelihood of a lender absorbing a loss increases.
This resource is part of the Innovative Funding Services (IFS) auto finance Library. Learn Why Lenders Calculate Loan to Value Ratios. A loan to value ratio, or LTV, is simply the ratio of a loan amount to the market value of the asset to be purchased with the loan.
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The loan to value ratio, or LTV ratio is used by lenders that represents the amount of the outstanding loan verses the market value of the property. The ltv ratio helps lenders determine risk when evaluating a borrowers mortgage application.
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Lenders in a falling market like to build in a buffer and will adjust their acceptable LTV ratio. Formulas. The Loan to Value Calculator uses the following formulas: LTV = Loan Amount / Property Value. Where, LTV is the loan to value ratio, LA is the original loan amount, PV is the property value (the lesser of sale price or appraised value).
A Loan-To-Value Ratio, also referred to as LTV Ratio, is a comparison between the value of your loan and the value of your home. Learn how your LTV can.
Understanding your loan-to-value ratio Your loan-to-value ratio (LTV) describes what you owe on your mortgage as a percentage of the total current value of your property. It’s important to understand your LTV ratio, because it affects the rate and type of new loan you may qualify for.