1. What is Loan-to-Value Ratio (LTV)?

The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. For home loans, it represents how much of the home's value is being financed.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The mortgage amount or loan being taken
• Home Value — The appraised value or purchase price of the home

Explanation: The equation calculates what percentage of the home's value is being borrowed.

3. Importance of LTV Calculation

Details: LTV is crucial for mortgage approvals, interest rates, and determining whether private mortgage insurance (PMI) is required. Lower LTV ratios generally mean better loan terms.

4. Using the Calculator

Tips: Enter the loan amount and home value in dollars. Both values must be positive numbers. The calculator will compute the percentage automatically.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Generally, 80% or lower is considered good as it avoids PMI. Below 60% may qualify for the best rates.

Q2: How does LTV affect my mortgage?
A: Higher LTV typically means higher interest rates and may require PMI. Very high LTV (above 95%) may make approval difficult.

Q3: Can LTV change after purchase?
A: Yes, as you pay down your mortgage and/or if the home value changes (appreciates or depreciates).

Q4: How is LTV different from combined LTV (CLTV)?
A: CLTV includes all liens on the property (like second mortgages), while LTV only considers the primary mortgage.

Q5: Does a down payment affect LTV?
A: Yes, a larger down payment results in a lower LTV ratio since you're borrowing less relative to the home's value.