The Loan-to-Value ratio is a factor that lenders consider before they approve a mortgage. Loan-to-Value Ratio, alos known as LTV, is the loan amount expressed as a percent of either the purchase price or the appraised value for the property.

For example, if one makes a 20% cash down payment on a property that is being bought, the loan-to-value ratio is 80%. Lenders can require borrowers of high LTV loans to pay mortgage insurance to protect the lender from the buyer default, which increases the costs of the mortgage. Sellers should be concerned about the buyer's LTV. If it is high and the appraised value of the home comes in lower than the purchase price, then the transaction is put in jeopardy. If it is low, the lender will then base the LTV on the lower of the two amounts. The Loan-to-Value Ratio displays your equity in the property, which is basically the amount of the property you own, expressed as a figure. One's equity can also be thought of as the amount of money one would recieve if one sold their property as its valued price. Your Loan-to-Value Ratio is an important figure that you need to know when recieving or refinancing a loan. This is how to figure out your loan-to-value ratio if you are in the process of recieving a loan. 1. First, start with the purchase price of the property. Example: $150,000 2. Then, subtract the amount of your downpayment. Example $20,000 3. Next, identify your loan amount, which is the purchase price minus the downpayment. Example: $150,000 - $20,000 = $130,000 4. Afer that, divide the loan amount by the purchase price. Example: $130,000 divided by $150,000 = 0.87 or 87%, which is your ratio. 5. Finally, you have your Loan-to-Value Ratio and this number would be used when referring to your loan. You would want a loan of 87% loan-to-value.