Loan-To-Value Ratio What is LTV?
The loan-to-value ratio (LTV) is a lending risk assessment ratio that financial institutions and other lenders examine before approving a mortgage.
You are looking to purchase a property that is valued at $100,000. The bank states that it will give you 80% LTV. That means that the bank will give you $80,000 of the property value. The remaining $20,000 is your down payment. Assessments with high LTV ratios are generally seen as a higher risk and, therefore, if the mortgage is approved, the loan generally costs the borrower more to borrow.