Loan to Value Ratio

(redirected from Loan to Value Ratios)

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 ?
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.
Bank of Namibia Governor Ipumbu Shiimi told The Economist on Wednesday that a process is already underway to assess the possibility of increasing the loan to value ratios for mortgage lending as part of measures to control credit growth extended to the private sector.
In addition, the bankers are proposing higher loan to value ratios for UAE national investors and expatriate investors.
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.
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.
Lenders reported an increase in credit availability for borrowers with loan to value ratios above 75 per cent in the fourth quarter of 2009, while the maximum loan to value ratio rose for the first time in over two years.
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.
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.
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."
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.
This involves playing "what if" scenarios to access the impact on investment return, loan to value ratios and debt service coverage of various cash flow scenarios.