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

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. In real estate, it represents the percentage of the property's value that is being financed by the loan.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The amount being borrowed for the property
• Property Value — The appraised value or purchase price of the property

Explanation: The equation calculates what percentage of the property's value is being financed by the loan.

3. Importance of LTV Calculation

Details: LTV is crucial for lenders to assess risk. Lower LTV ratios generally mean better loan terms, while higher ratios may require private mortgage insurance (PMI) or result in higher interest rates.

4. Using the Calculator

Tips: Enter the loan amount and property value in dollars. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Generally, 80% or lower is considered good as it avoids PMI requirements. Conventional loans often require ≤80% LTV for the best rates.

Q2: How does LTV affect mortgage approval?
A: Higher LTV ratios may lead to stricter approval requirements or higher interest rates as they represent greater risk to lenders.

Q3: Can LTV change over time?
A: Yes, as you pay down your loan and/or as the property value changes, your LTV will change accordingly.

Q4: What's the maximum LTV for different loan types?
A: Conventional loans typically max at 97%, FHA at 96.5%, and VA loans can go up to 100% LTV.

Q5: How can I lower my LTV ratio?
A: You can lower LTV by making a larger down payment, paying down your mortgage principal, or through property value appreciation.