Loan-To-Value (LTV) ratio Definition | Business Dictionaries from AllBusiness.com
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Business Definition for: Loan-To-Value (LTV) ratio
Dictionary of Real Estate Terms
Loan-To-Value (LTV) ratio

the portion of the amount borrowed compared to the cost or value of the property purchased-that is, mortgage debt divided by the value of the property. lenders are often constrained as to the maximum loan-to-value ratio on loans they originate. Loans on commercial property by pension funds, banks, and insurance companies are typically limited to a maximum of 70-80% of value. Loans on owner-occupied houses or condominiums may reach a 90-95% ratio when mortgage insurance is used.

Example: Abel bought a $100,000 house and arranged a $90,000 mortgage loan, resulting in a 90% loan-to-value ratio. Home mortgages at more than an 80% LTV ratio generally require mortgage insurance .

See also Private Mortgage Insurance (PMI) , FHA mortgage loan , mortgage insurance , VA loan or mortgage
Related Terms:
Private Mortgage Insurance (PMI)

type of insurance available from lenders that insures against loss resulting from a default on a mortgage loan and can substitute for down payment money.

FHA mortgage loan

mortgage loan insured by the Federal Housing Administration (FHA). Section 203(b) is the most popular program.

mortgage insurance

contract insuring a mortgage lender against default risk. Mortgage insurance allows a borrower to purchase a home with a down payment as low as 3 to 5% of the purchase price-even lessfor qualified borrowers-instead of the usual 20% down paymentlenders normally require. Insurance premiums are paid by the borrower.The Federal Housing Authority, an agency in the Department of Housing and Urban Development, insures mortgages on one-to-fourfamily houses and condominiums, and it reimburses the mortgage lender if default occurs. Mortgage insurance purchased from a commercial insurance carrier is known as

VA loan or mortgage

home loan guaranteed by the U.S. Veterans Administration (VA) under the Servicemen's Readjustment Act of 1944 and later. The VA guarantees restitution to the lender in the event of default. The guaranty is $36,000 for a veteran with full entitlement. Home must be a principal residence.

Example: Abel, a veteran of the U.S. Army, wishes to purchase a home. Abel may apply for a VA loan with the Veterans Administration and, if qualified, may obtain a mortgage loan from a lending institution with no down payment.

Referring Terms:
loan ratio
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