What Is Loan-To-Value (LTV) Ratio?

What is the Loan-to-Value(LTV) Ratio?

The Loan-To-Value (LTV) ratio is the ratio of a loan (mortgage) to the value of an asset purchased.

The LTV is calculated as the amount of the mortgage loan divided by the appraised value of the property, expressed as a percentage.

For example, a borrower that takes on a $425,000 mortgage to purchase a home appraised at $500,000 would have an LTV of 85%. (425,000 / 500,000).

This metric is important because it will determine if your mortgage is high-ratio (> 80% LTV) or conventional (<80% LTV).