Loanfactz Definitions
Glossary of Legal Terms, Loan Terms and Home Construction, Repair and Maintenance Definitions. Some words have more than one meaning. Only those meanings relating to this site will be used.
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Loan to Value (LTV) Ratio
A percentage calculated by dividing the amount borrowed by either the purchase price or appraised value of the home, whichever is the lower of the two amounts. A 75,000 dollar loan on a property appraised at 100,000 dollars is a 75% loan to value ratio, example, 75,000 dollar loan amount divided by the 100,000 dollar price or appraised value. The higher the loan to value (LTV) ratio, the less cash a borrower is required to pay as a down payment, which puts lenders more at risk, also can carry a higher interest rate, have mortgage insurance added to the loan, and may be harder for the borrower to qualify for.
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