What is a Loan to Value and Why Does it Matter

The loan to value ratio is the amount of money you borrow compared with the appraised value of the home you are purchasing. Each loan has a specific LTV limit.

For example: With a 95% LTV loan on a home priced at $100,000, you could borrow up to $95,000. The higher the LTV, the less cash homebuyers are required to pay out of their own funds.

So, to protect lenders against potential loss in case of default, the higher LTV loans (over 80%) usually require a mortgage insurance policy.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s