Loan-to-Value Ratio (LTV)

Definition: A loan-to-value ratio compares a loan amount with the property value used by the lender. LTV = loan amount ÷ value × 100.

Example

A $240,000 loan against a $300,000 value has an 80% LTV: $240,000 ÷ $300,000 = 0.80.

Keep the distinction clear

For a typical purchase loan, the lender uses the lower of the purchase price and appraised value. Combined LTV includes additional loans secured by the property; it is not always the same as first-mortgage LTV.

Related terms

Down Payment · Equity · Private Mortgage Insurance (PMI)

Keep studying

Loan-to-Value, Down Payments, Equity, and PMI

References: CFPB: Loan-to-value ratio

Pronunciation (US): LOHN tuh VAL-yoo RAY-shee-oh; LTV: el-tee-VEE (capitals show stress)

Pronunciation reference: Merriam-Webster