Loan to value
By Jude Wallis
Loan to value, or LTV, is the loan balance divided by the property value, expressed as a percent. The remainder of the value is the owner's equity.
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LTV answers one question: how much of the property belongs to the lender. It falls two ways, as the balance is paid down and as the value rises, and only the first of those is under the borrower's control.
Thresholds turn the ratio into money. Private mortgage insurance is usually required above 80 percent and can be removed below it, and rate sheets are banded by LTV, so a ratio that lands a point on the wrong side of a band changes the quote.
Which value goes in the denominator matters as much as the arithmetic: a lender uses an appraisal or, on a purchase, the lower of price and appraisal, never the owner's estimate. The loan to value calculator is the ratio, how loan to value works is the explainer, and private mortgage insurance is the cost the ratio triggers.