The loan amount divided by the appraised value or sales price of a property, expressed as a percentage.Another commonly used term is CLTV, or combined loan to value. This references the total LTV of a combo loan. Some banks will give you a two loan combination so you don't have to pay mortgage insurance. In this case, the loan would be something like an 80%/20% or 70%/30%, both of these have a CLTV of 100% but each individual loan has its own LTV.
This will in a lot of cases will determine what the lender can do for you. The lower the Loan-to-value the better of you are.
It is important to remember that when calculating loan to value, lenders will always round up. For example, if your loan to value (LTV), meaning your new loan amount divided by your homes appraised value, is at 88%, your interest rate will be based on the 90% LTV category.
The loan-to-value ratio (abbreviated LTV) is among the most important factors affecting your loan application and the overall program which you will qualify for. We use the loan to value ratio to determine the limits within your debt ratios and where they must fall for you to be approved for a particular loan. LTV may also determine the type of fees and the amount(s) you may be charged for your loan. Furthermore, loan-to-value ratio determines whether or not you must pay Private Mortgage Insurance (PMI) and/or use an impound account / escrow account.
Your loan-to-value ratio (LTV) is a simple calculation of the amount you would like to borrow divided by the value of the property you are purchasing or refinancing. This gives you a simple loan to value ratio. For example, a house valued at $100,000 which you intend to purchase with an $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV or loan-to-value ratio of 80 percent, because the amount of the loan represents 80 percent of the value of the property.
The value of your property is either value determined in an appraisal OR the market value of the property (amount you pay for the property), whichever is lower. During the initial stages of qualification and approval, your property value is taken to be an estimate. If necessary for your loan program, this value will be confirmed by a professional appraiser.
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