Friday, December 30, 2016 - Article by: Leah TenBieg - Prospect Financial Group, Inc. -
A loan-to-value ratio, commonly known as an LTV, is something to be aware of when you are looking to apply for a loan program. After all, an LTV can be the one determining factor that decides if you are approved for a mortgage loan. Read below to understand just what LTV is and how yours can be easily calculated.
Defining and calculating LTVLTV is how you know just how much mortgage loan value you have in relation to how much your property is worth. By dividing the loan amount by the property value, LTV is quickly calculated. For example, if you take on a $70,000 mortgage to buy a home that's worth $100,000, you would have an LTV ratio of 70.00% (70,000/100,000).
When and why LTV is crucial While there are many different aspects that are important when you are applying for a loan, the LTV is one of the more critical pieces. Lenders use LTV to determine how much risk is involved in approving a mortgage. To put it simply, the more money lenders lend, the more risk they obtain.
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