Loan-To-Value Ratio (LTV)
Loan-To-Value Ratio (LTV)
Investor Term:
LTV
Definition:
A loan-to-value ratio (LTV) is a financial ratio that measures the amount of debt a borrower has relative to the value of the asset they are borrowing against. It is calculated by dividing the loan amount by the asset's appraised value.
Formula:
LTV = Loan Amount / Appraised Value of Asset
EXAMPLE
For example, if a borrower takes out a loan of $100,000 to buy a house appraised at $200,000, then their LTV would be 50%.