Loan-to-Value Ratio (LTV)
Loan-to-value ratio (LTV) is the amount of the mortgage loan compared to the value of the property.
This ratio is calculated by the lender prior to providing a mortgage. The results of this calculation help to determine whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan or a high ratio loan.
Here is an example. Assume:
Property Value = $100,000
Down Payment = $10,000
In this case the LTV = 90%
The calculation used is simple: 1 – (down payment / property value)
Or in our example: 1 – ($10,000 / $100,000)