# 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 ?
The high loan-to-value (LTV) refinance option will provide refinance opportunities to borrowers with existing Fannie Mae mortgages who are making their mortgage payments on time, but whose LTV ratio for a new mortgage exceeds the maximum allowed for standard refinance products or is above 95% LTV.
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.
In addition, the loan to value (LTV) prole of legacy debt secured against investment assets improved; of the outstanding debt, 63% had a LTV ratio of 70% or less, compared to 53% in the previous year.
People with knowledge of the matter said NHB's efforts are aimed at increasing the LTV ratio for loans above Rs 20 lakh to 90% from 80% now.
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.
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.
The "stable" outlook means the rating agency expects Exor to keep its conservative capital structure and financial flexibility with an LTV ratio below 20%.
Key terms of the facility are LIBOR plus 275 basis points for a loan to value (LTV) ratio of less than or equal to 10 percent, with no LIBOR floor; and LIBOR plus 325 basis points for a LTV ratio of greater than 10 percent, with no LIBOR floor.
As a result, the proposed legislation could mandate cancellation even for borrowers whose true LTV ratio is higher than it was when the mortgage was originated.
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.

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