1. What is Loan To Value (LTV)?

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 commonly used in real estate transactions for investment properties.

2. How Does the Calculator Work?

The calculator uses the LTV equation:

Where:

• \( Loan \) — The amount of money borrowed
• \( Value \) — The appraised value of the property

Explanation: The equation calculates what percentage of the property's value is being financed by the loan.

3. Importance of LTV Calculation

Details: LTV is a key metric lenders use to assess risk. Lower LTV ratios generally mean less risk for the lender and may result in better loan terms for the borrower.

4. Using the Calculator

Tips: Enter the loan amount and property value in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for investment properties?
A: Most lenders prefer LTV ratios of 80% or less for investment properties, though this can vary by lender and market conditions.

Q2: How does LTV affect mortgage insurance?
A: Higher LTV ratios (typically above 80%) usually require private mortgage insurance (PMI) for conventional loans.

Q3: Can LTV change over time?
A: Yes, as you pay down the loan and/or as the property value changes, the LTV ratio will change accordingly.

Q4: What's the difference between LTV and CLTV?
A: CLTV (Combined Loan To Value) includes all liens on the property, not just the first mortgage.

Q5: How do lenders determine property value?
A: Lenders typically use an appraisal to determine the current market value of the property.