Definition: Sometimes you will see a loan-to-value ratio abbreviated as LTV. This ratio is figured by taking the amount of the loan and dividing it by the market value of the home. Loan-to-value ratios are important because the lower the ratio, the lower the interest rate charged by the lender and the easier it is to qualify for a loan.
A common loan-to-value ratio is 80%. Therefore, a home worth $200,000 at an 80% loan-to-value ratio would have a loan of $160,000. Eighty percent of $200,000 is $160,000.
Also Known As: LTV
Alternate Spellings: loan to value ratio
Common Misspellings: laon to value ratio
Examples:
If a buyer obtains a $90,000 loan on a home worth $100,000, the loan-to-value ratio is 90%.
