Loan-to-Value (LTV) Ratio is a lending or borrowing risk assessment factor that every lender wants to consider before approving a Home Loans. It is calculated to the loan amount in percentage to the appraised value of the property at stake. So, if one wants to borrow an amount of $ 210, 500 to purchase a house of $250,000 then the LTV ratio count as: $ 210, 000/$250,000 or 0.842 (84%).

Higher in LTV ratio, more is the risk factor for the lender and hence less chance of mortgage approval. However, it is not the lone criteria to assess the risk factor in mortgages. LTV ratio articulates the equity of property i.e. the amount of property one owns. At higher LTV, the equity comes down and in this case lender is at greater risk which forces them to increase their cost.

Share and Enjoy:
  • Print
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • Blogplay