1. What is Loan-to-Value (LTV) Ratio?

The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. It's a key risk assessment metric in mortgage lending.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( V \) — Property value or purchase price (USD)
• \( LTV \) — Loan-to-value ratio (%)

Explanation: The LTV ratio compares the amount of the loan to the value of the property. A higher LTV ratio indicates more risk for the lender.

3. Importance of LTV Ratio

Details: LTV ratio affects loan approval, interest rates, and whether private mortgage insurance (PMI) is required. Lower LTV ratios generally qualify for better loan terms.

4. Using the Calculator

Tips: Enter the principal loan amount and property value in USD. Both values must be positive numbers. The calculator will compute the LTV ratio as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for a mortgage?
A: Typically, 80% or lower is considered good. Above 80% may require PMI. Conventional loans often max at 97% LTV.

Q2: How does LTV affect interest rates?
A: Lower LTV ratios generally qualify for lower interest rates as they represent less risk to the lender.

Q3: Can LTV change after closing?
A: Yes, as you pay down principal or if property values change. Refinancing may be possible when LTV improves.

Q4: What's the maximum LTV for FHA loans?
A: FHA loans allow up to 96.5% LTV with a minimum 3.5% down payment.

Q5: How is LTV different from CLTV?
A: CLTV (Combined LTV) includes all liens on the property, while LTV only considers the first mortgage.