What is the 'LoanToValue Ratio  LTV Ratio'
The loantovalue ratio (LTV ratio) is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is approved, the loan generally costs the borrower more to borrow. Additionally, a loan with a high LTV ratio may require the borrower to purchase mortgage insurance to offset the risk to the lender.
BREAKING DOWN 'LoanToValue Ratio  LTV Ratio'
The LTV ratio is calculated as the amount of the mortgage lien divided by the appraised value of the property, expressed as a percentage. For example, a borrower taking on a $92,500 mortgage to purchase a home appraised at $100,000 would have an LTV ratio of 92.50% (92,500/100,000).The loantovalue ratio is a critical component of mortgage underwriting, whether it be for the purpose of purchasing a residential property, refinancing a current mortgage into a new loan, or borrowing against accumulated equity within a property. All lenders assess the LTV ratio in an effort to determine the level of exposed risk they take on when underwriting a mortgage, calculated as the delta between the property's appraised value and the total amount borrowed. When borrowers request a loan for an amount that is at or near the appraised value, and therefore a higher loantovalue ratio, lenders perceive that there is a greater chance of the loan going into default because there is little to no equity built up within the property. Should foreclosure take place, the lender may find it difficult to sell the home for an amount sufficient to cover the outstanding mortgage balance and make a profit from the transaction.
High LTV Ratio Implications
While the loantovalue ratio is not the only determining factor in securing a mortgage or home equity loan or line of credit, the metric does play a substantial role in how much borrowing costs the homeowner. The majority of lenders offer mortgage and home equity applicants the lowest possible interest rate when the loantovalue ratio is at or below 80%. A higher LTV ratio does not exclude borrowers from being approved for a mortgage, although the total cost of the loan rises as the LTV ratio increases. For instance, a borrower with an LTV ratio of 95% may be approved for a new mortgage, but the interest rate may be up to a full percentage point higher than a borrower with an LTV ratio of 75%. In addition to the higher interest rate, lenders may tack on a mortgage insurance requirement for high LTV ratio transactions. Mortgage insurance has the potential to substantially raise a borrower's monthly mortgage payment, and coverage may be required until the loantovalue ratio reaches 80%.

125% Loan
A loan, usually a mortgage, with an initial loan amount equal ... 
First Mortgage
A mortgage in a first lien position on the property that secures ... 
Combined Loan To Value Ratio  ...
A ratio used by lenders to determine the risk of default by prospective ... 
Piggyback Mortgage
A type of mortgage where a second mortgage or home equity loan ... 
Qualifying Ratios
A set of ratios that are used by lenders to approve borrowers ... 
Appraised Value
An evaluation of a property's value based on a given point in ...

Personal Finance
Conquering The Terms Of Your Mortgage
Buyers with big down payments should get the best mortgage terms. Unfortunately, the equation isn't that simple. 
Investing
Financing Basics For FirstTime Homebuyers
If you're looking to get your first mortgage, there are many financing options available. 
Insurance
How to Outsmart Private Mortgage Insurance
It's possible to use a second mortgage to avoid this fee, but is it in your best interest? 
Personal Finance
How To Refinance If Your Home Appraisal Is Too Low
When you take out a mortgage on a home or refinance an existing mortgage, most lenders want a loantovalue ratio (LTV) of 80 percent or lower. 
Personal Finance
It Pays to Be a ‘HENRY’
Why? Because being a “High Earner Not Rich Yet” may help you buy the house of your dreams with a lower down payment. 
Personal Finance
When Are Mortgage Lenders Better Than Banks?
Individuals seeking a mortgage loan should consider factors or circumstances that may make a mortgage lender a better choice than a traditional bank. 
Investing
Commercial Real Estate Loans
Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need. 
Investing
Understanding LoantoValue Ratio
Loantovalue ratio (LVR) is a tool used to evaluate the risk in a collateralized loan, usually a mortgage loan. 
Personal Finance
Guidelines for FHA Reverse Mortgages
FHA guidelines protect borrowers from major mistakes, prevent lenders from taking advantage of borrowers and encourage lenders to offer reverse mortgages. 
Personal Finance
Don't Get Overcharged for Your Mortgage
Don't pay more for a mortgage than necessary. Here’s a quick look at the different categories and how to be sure you're getting the best deal.

Why does the loantovalue ratio matter?
Learn how the loantovalue (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >> 
What industries use the loan to value ratio?
Find out more about the loantovalue ratio, what the ratio measures and what industries the loantovalue ratio is most ... Read Answer >> 
How do I calculate how much home equity I have?
Find out how to calculate the home equity in your home, your home equity percentage and the loantovalue, or LTV, based ... Read Answer >> 
How does the loantovalue ratio affect my mortgage payments?
Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >> 
What pricetobook ratio is considered average in the chemicals sector?
Learn more about the loantovalue ratio, what the ratio measures and how to calculate the loantovalue ratio on Microsoft ... Read Answer >> 
What is a combined loan to value ratio?
Learn what combined loan to value is, why it is important and how lenders use it, along with other ratios, to assess the ... Read Answer >>