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What is a Loan to Value Ratio?

What is a Loan to Value Ratio?

What is a loan to value ratio?

home loanLoan to value ratio is used as a tool by a lender for the purpose of assessing its risk in connection with a loan before approving a mortgage. The loan to value ratio is calculated as follows:

LTV ratio = Mortgage Amount
Appraised Property Value

In closings, the property value is typically set at the purchase price. Essentially, the higher the ratio, the higher the risk to a lender that is approving a mortgage. This amount is generally expressed as a percentage.

The loan to value ratio can also determine how much mortgage insurance the borrower will have to pay on a loan. If the value is less than 80%, no mortgage insurance may be required in connection with conventional loans.

If you have any questions regarding obtaining a mortgage on your property, Orlando FL real estate attorneys like Nishad Khan P.L. can help. Call Nishad Khan P.L. to learn more.

 

The Orlando Real Estate Attorneys at the Law Offices of Nishad Khan P.L. serve clients with Residential, Commercial, and Investment Real Estate Transactions. Let our expertise in Central Florida Real Estate help you.