What does 'LTV' (Loan-to-Value ratio) mean in mortgage lending?
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Explanation
Loan-to-Value (LTV) ratio is calculated by dividing the mortgage amount by the property's appraised value. A buyer putting 20% down has an 80% LTV. Lenders prefer lower LTVs because they represent less risk. LTVs above 80% typically require Private Mortgage Insurance (PMI), which protects the lender (not the buyer) at an additional cost.