Definition of the term ltv?
1 answersQuestion asked ( July 28, 2009 , Shopping / Finance )
One of the things i hate about applying for a loan is the extensive documentation process and the assumption of bankers that customers know everything on loan finances. One such embarrassment is what they called ltv. What is ltv?
Answers to : Definition of the term ltv...
Answer
Loan-to-value ratio is the ratio between mortgage amounts of the asset to the value of loan. For example a borrower needs $120,000 to purchase a house worth $140,000; the LTV ratio is $120,000/140,000 that is 86%.
This is a risk assessment ratio for lending as defaulting is a primary concern for all lending decisions. If the borrower has high LTV ratio then the lenders can insist on mortgage insurance to be covered for having to take the risk of absorbing the losses if the borrower defaults. Before a mortgage is approved, if the LTV ratio is high then the risk is also ascertained to be high.
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