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LTV
(Loan-to-Value Ratio)
LTV (Loan-to-Value Ratio) measures a loan’s size relative to the collateral’s value, expressed as a percentage. For mortgages, it’s the loan amount divided by the home’s appraised value.
An 80% LTV means the borrower puts 20% down; higher LTVs (e.g., 95%) risk lender-required mortgage insurance. Lenders use LTV with DTI and FICO to assess risk—lower LTVs secure better rates. Refinancing or HELOCs may increase LTV. The FDIC caps conventional mortgages at 80% LTV for optimal terms. Investors monitor LTV in REITs or commercial loans to gauge leverage risk.
An 80% LTV means the borrower puts 20% down; higher LTVs (e.g., 95%) risk lender-required mortgage insurance. Lenders use LTV with DTI and FICO to assess risk—lower LTVs secure better rates. Refinancing or HELOCs may increase LTV. The FDIC caps conventional mortgages at 80% LTV for optimal terms. Investors monitor LTV in REITs or commercial loans to gauge leverage risk.