What is Loan to Value?

What is loan to value or LTV? Well if you’re interested in getting a mortgage, LTV is one of the key factors used in the approval process. Here we will teach you how to calculate LTV and tell you what it’s all about!

To put it simply, loan to value is the amount of money you plan on mortgaging versus the professionally assessed value of the home. For example: If you purchase a home that is worth $170,000 and your mortgage is $130,000 that means your loan to value is 76%. It is a figure that is really easy to figure out as well! Grab a calculator (or your phone) and type in the value of the home. Now, divide that by the amount of your mortgage. Finally multiply by 100 and you’ve got your LTV!
But what’s this all mean to me?
Well, finding out the loan to value can benefit you in many ways. From a mortgage, to refinancing, equity loans, and more! When it comes to mortgages the loan to value percent is on of the key risk factors looked at. The amount that a lender would have to absorb if a borrower were to default and go into foreclosure increases as the LTV percentage increases. A lender may even require a borrower to purchase mortgage insurance (also known as a mortgage guarantee) if the LTV is too high. That will protect the lender on some of the loss if the borrower defaults.

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