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 ?
Analysis shows the average loan to value ratio is 59pc.
* Owner-occupied units can be as low as 60 percent as long as loan to value ratio is 65 percent or less.
Typically, a 65 percent to 75 percent loan to value ratio is sought by lenders, with debt service coverage of 1.25 to 1.35.
In addition, the bankers are proposing higher loan to value ratios for UAE national investors and expatriate investors.
BORROWERS with higher loan to value ratios are paying significantly higher interest on their mortgages than those with lower LTVs , an analysis by independent financial research company Defaqto has found.
Loan to income and loan to value ratios tend to rise in credit booms as lending standards become lax and prices inflate, Sir Johntold the London School of Economics.
Fixed rates are available at loan to value ratios (LTVs) of up to 75% and the range Includes funding for self-contained units as well as more complex HMO properties.
Powers to be given to the bank will include forcing banks to hold more capital against mortgages with high loan to value ratios or high loan to income ratio, in case risk to financial stability is perceived by policymakers.
ARLA's third quarter review found that the average landlord buying a new property planned to borrow just 70% of its value, while they had loan to value ratios of around 57% on properties already owned.
Mortgages are being withdrawn on a daily basis as lenders raise their rates, reduce their loan to value ratios and cancel deals attracting too much business.
From today, it will no longer offer a range of different rates for people with different loan to value ratios, instead offering one rate for all loans of up to 95% of a property's value.
You can get today's version and get limited recourse and recourse, but loan to value ratios are lower, banks are more careful, regulators are looking more carefully, and the bank's auditors are watching more carefully."