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Loan-to-value (LTV)

ProductionIllustrated Click2CE lesson; AI-assisted production with Sarah narration

In brief

Loan-to-value is the loan amount divided by the specified property value basis, expressed as a percentage.

Example

A $240,000 loan divided by a $300,000 value equals 0.80, or 80% LTV. Use the value basis stated in the problem.

TranscriptRead along, or select a timestamp to jump there
  1. Loan-to-value compares the loan amount with the property value used
  2. by the lender.
  3. Start with our example:
  4. a two hundred forty thousand dollar loan and a three
  5. hundred thousand dollar value.
  6. Divide loan by value:
  7. two hundred forty thousand divided by three hundred thousand equals
  8. zero point eight.
  9. Multiply by one hundred to express it as eighty percent.
  10. The blue portion shows the loan relative to that value.
  11. Use the value basis specified in the problem.
  12. In many purchase-loan settings the lender uses the lower of
  13. price or appraisal.
  14. Mortgage insurance rules depend on the loan program, not the
  15. ratio alone.
  16. Quick check:
  17. what is the loan-to-value ratio in this example?
  18. Eighty percent.

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