Definition
Loan-to-value ratio (LTV) compares the amount you owe on a loan to the current value of the asset securing it. Lenders use LTV to assess risk — a higher LTV means you have less equity and the lender has less protection if you default.
Example
A $280,000 mortgage on a $350,000 home has an LTV of 80% ($280,000 ÷ $350,000 × 100). At 80% LTV you have 20% equity and typically avoid PMI. If the home fell to $310,000 while you owe $280,000, LTV jumps to 90%.
How It's Calculated
LTV = (Loan Balance ÷ Property Value) × 100
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