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 ?
Through this transaction, the insurance company was able to receive a substantial infusion of capital through the partial prepayment, as well as complete the sale of the note, which (after the partial prepayment) conformed to the new loan to value standards dictated by current capital markets.
For group II mortgage loans, the weighted average loan to value ratio is approximately 65.
The weighted average original loan to value ratio (LTV) of the pool is approximately 79.
The group will consider projections of future cash flows in underwriting and will finance projects up to an overall 80% loan to value, including primary debt.
Approximately 96% of the mortgage loans with over 60% loan to values have coverage down to 60%.