A loan-to-value (LTV) ratio is used in the process of qualifying home buyers for a mortgage. It is the relationship between the outstanding loan balance and the appraised value of a home, usually stated as a percentage. An LTV ratio is calculated by dividing the value of a home into the amount borrowed (at the beginning of a mortgage) or the outstanding balance on a mortgage (after payments have been made) and multiplying by 100. For example, if the appraised value of a house is $300,000 and you owe $190,000, your LTV ratio is 63 percent (190,000/300,000 or 0.63 x 100). The lower the LTV percentage, the more equity borrowers have in their home, which makes them attractive candidates to lenders.
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