Loan to Value Ratio

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Loan to Value Ratio

1. In mortgages, the ratio of the amount of a potential mortgage to the value of the property it is intended to finance, expressed as a percentage. It is used as a way to assess the risk of making a particular mortgage loan. A lower loan-to-value ratio is seen as a lower risk to the lender. Most mortgage lenders require a maximum loan-to-value ratio of 75%. That is, a borrower is usually expected to pay for 25% of the value of a property out-of-pocket.

2. More broadly, a ratio of the amount of a potential loan to the asset it is intended to finance. In addition to gauging the risk involved in making the loan, it tells the borrower whether or not the loan can be repaid if he/she sells the asset. This can be important if the borrower becomes unable make payments.
References in periodicals archive ?
Typically, banks can only offer loans with fairly low LTV ratios in order to avoid taking excess risk.
The LTV ratios range from 50 to 100 percent, while the benchmark ratio across financing and property types remained at 71 percent.
In some cases, these recent LTV ratios are well below the LTV ratios of maturing loans, which raises the question of whether maturing loans can be refinanced in today's more restrictive lending environment without requiring additional equity.
Normally LTV ratios are decided by lenders taking account of current and prospective interest rates, the risk characteristics of the borrower, the riskiness of the asset being offered as collateral, their own balance sheet and liquidity in addition to the prospects for the economy over the period in which they expect to have the exposure," Dr Nasser Saidi, former chief economist at the Dubai International Financial Centre, told this scribe.
4 million), Tradewinds Capital's NOI remain above MARC's assumed NOI used in determining the LTV ratios of the collateral portfolio.
In September, HARP loans for borrower with LTV ratios greater than 105 percent represented more than 70 percent of HARP originations in Nevada, Arizona and Florida.
With the corresponding increase to 68 per cent, the UK now has one of the world's highest LTV ratios - higher than both the global and European averages, although leverage levels are still lower than in the US.
Generally, mortgages with higher LTV ratios (smaller down payments) and lower credit scores are riskier than mortgages with lower LTV ratios and higher credit scores.
Key credit metrics are therefore the credit quality of the transaction sponsor (Schahin Engenharia) and LTV ratios.
Borrowers with LTV ratios greater than 105 percent accounted for more than half of the total HARP volume in August.
The incentive only applies to Relief Refinance Mortgages with LTV ratios between 105 percent and 125 percent.
2003 LTV Ratios, FICO Scores, and Credit Support Levels