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 ?
At the expiration of the loan in 3 to 5 years, with the improved performance of the hotel and the market, the mezzanine provider is counting on their initial 85% to 90% loan-to-value loan, now being only a 60% loan, easily financeable with new first mortgage proceeds.
Lenders know, for example, that the probability of default, as well as the extent of the loss resulting from default, is strongly related to the loan-to-value ratio of the mortgage: The higher the ratio, the greater the likelihood of default and the larger the potential loss.
The average outstanding principal balance of the loans is $193,754, the weighted average combined original loan-to-value ratio is 76.
Black and Hispanic mortgage applicants in Boston, on average, had larger debt burdens, higher loan-to-value ratios, and weaker credit histories, and in other respects did not fare as well according to the evaluation criteria used by mortgage lenders.
The loan-to-value was under 60% on this fully renovated, 100% occupied property
For example, in determining what range of possible loan-to-value limits the agencies should propose, current banking practices and traditional real estate lending rules of thumb were taken into account, and the agencies believe that the ratios proposed for public comment are generally consistent with these standards.
For conventional loans, a 75 percent loan-to-value ratio is considered at the higher end and loans are more typically 65 to 70 percent loan-to-value.
87 percent interest rate and a loan-to-value of 61 percent.
The weighted average original loan-to-value ratio (OLTV) is 97.
For HUD loans, according to Davis, the loan-to-value ratio is 90 percent for new construction and typically 85 percent for refinancing.
As of the cut-off date, the collateral for series 2003-8 had a weighted average original loan-to-value (OLTV) of 78.