{"id":1956,"date":"2016-09-01T19:29:40","date_gmt":"2016-09-01T19:29:40","guid":{"rendered":"http:\/\/riverbankfinance.com\/blog\/?p=1956"},"modified":"2016-09-09T18:52:40","modified_gmt":"2016-09-09T18:52:40","slug":"what-is-a-loan-to-value-ltv-ratio","status":"publish","type":"post","link":"https:\/\/riverbankfinance.com\/blog\/what-is-a-loan-to-value-ltv-ratio\/","title":{"rendered":"What is a Loan-to-Value (LTV) Ratio?"},"content":{"rendered":"

If you\u2019ve ever been in the market for a mortgage, you\u2019ve probably heard the phrase \u2018loan-to-value ratio\u2019 or \u2018LTV\u2019 for short. <\/span>\u00a0<\/span>Obtaining a new mortgage can be nerve-wracking, even without the financial jargon and acronyms\u2014so let\u2019s talk about LTV, what it means, and how it affects you and your mortgage.<\/span><\/p>\n

How are Loan-to-Value ratios calculated? <\/span><\/h3>\n

The Loan-to-Value Ratio is essentially the financed amount divided by the home\u2019s value or purchase price, expressed as a percentage. <\/span>\u00a0<\/span>Let\u2019s say for example that you\u2019ve found a home you\u2019d like to purchase for $200,000 with a down payment of 20% ($40,000). <\/span>\u00a0<\/span>You would be financing $160,000 of the $200,000 purchase price, which gives you a loan-to-value ratio of 80%.<\/span><\/p>\n

Why\u00a0are Loan-to-Value ratios important?<\/span><\/h3>\n

Now that you know what LTV means, let\u2019s talk about why it is important. <\/span>\u00a0<\/span>The higher your LTV, the greater \u2018risk\u2019 you are to your lender. <\/span>\u00a0<\/span>This, among other factors, determines the interest rate your lender will offer you.<\/span>\u00a0 <\/span>You may be thinking \u2018What if I don\u2019t have 20% to put down? What other options do I have?\u2019 Well, I\u2019m glad you asked!<\/span>\u00a0 <\/span>There are many loan programs available today; each with benefits, and its own unique set of guidelines.<\/span><\/p>\n