loan-to-value ratio

(redirected from LTV ratio)

Loan-to-value ratio (LTV)

The ratio of money borrowed on a property to the property's fair market value.

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.

loan-to-value (LTV) ratio

The relationship between the principal amount of a loan and the appraised value of the property serving as security. A loan of $80,000 on a property appraised at $100,000 is an 80 percent LTV.Residential mortgages with an LTV of 80 percent or less qualify for FHA insurance; if the ratio is higher, then borrowers may be required to obtain private mortgage insurance.Generally speaking, the higher the LTV, the higher the interest rate will be because the lender has assumed more risk.Those risks are as follows:(1) When there is little equity in the property, it has a low hostage value; the borrower is more likely to default and walk away from the property because the borrower has little to lose. (2) At foreclosure, the property may not bring a price sufficient to pay off the principal balance of the loan, much less the accrued interest and costs of foreclosure.

Loan-to-Value Ratio (LTV)

The loan amount divided by the lesser of the selling price or the appraised value.

The LTV and down payment are different ways of expressing the same facts. See Down Payment/Down Payment and LTV.

References in periodicals archive ?
Summary: However, the LTV ratio will remain the same for a person applying for a loan above Rs 20 lakh but who doesn't take the loan under the mortgage guarantee programme.
Trepp data show that most commercial property loans underwritten in 2013 have an LTV ratio of about 60%, while multifamily loans have an LTV that is about 70%.
Jahja Setiaatmadja said the policy of the central bank to determine progressive LTV ratio on housing credits , the first, second and third and soon, is one method of curbing an increase in property prices.
Third: The maximum LTV ratio of mortgage loans for standalone car park spaces shall be set at 40% and the maximum loan tenor at 15 years.
The association will also recommend to the banking regulator to raise the maximum LTV ratio to 75-80 per cent, as it will boost the lending activities in the year.
Under one alternative method, lenders would individually establish LTV ratio limits within or below a range of supervisory limits prescribed in uniform regulations and subject to supervisory review.
These revised values coupled with the amortization of the notes since closing, result in a decreased LTV ratio of 48% from 50% according to the appraiser's valuation.
In other words, if the value of the collateral drops, the borrower must immediately make an extra payment of principal to reduce the size of ("resize") the loan and restore the original LTV ratio.
For those with an LTV ratio up to 75%, the risk weight is 50% for loans up to Rs 30 lakh and 75% for loans between Rs 30 lakh and Rs 75 lakh.
The previous maximum LTV ratio for Relief Refinance Mortgages had been 105 percent.
According to S&P's revised calculation, Saad Group's LTV ratio stood at 29 per cent at year-end 2008, which was in line with the rating agency's historical threshold of 30 per cent.
According to our revised calculation, Saad Group's LTV ratio stood at 29% at year-end 2008, which was in line with our historical threshold of 30%.