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Loan-to-value compares the loan amount with the property value used

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by the lender.

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Start with our example:

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a two hundred forty thousand dollar loan and a three

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hundred thousand dollar value.

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Divide loan by value:

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two hundred forty thousand divided by three hundred thousand equals

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zero point eight.

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Multiply by one hundred to express it as eighty percent.

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The blue portion shows the loan relative to that value.

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Use the value basis specified in the problem.

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In many purchase-loan settings the lender uses the lower of

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price or appraisal.

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Mortgage insurance rules depend on the loan program, not the

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ratio alone.

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Quick check:

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what is the loan-to-value ratio in this example?

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Eighty percent.