Loan to value: Difference between revisions
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Loan To Value is the ratio of the amount of a mortgage loan to the value of the residential property, or other asset, on which it is secured. | Loan To Value is the ratio of the amount of a mortgage loan to the value of the residential property, or other asset, on which it is secured. | ||
:<span style="color:#4B0082">'''Example 1'''</span> | |||
:A property is valued at £400,000. | |||
:The outstanding amount of a loan secured on it is £300,000. | |||
:The loan to value ratio is 300,000 / 400,000 | |||
:= 75% | |||
The lower the LTV, the lower the risk for the lender. | The lower the LTV, the lower the risk for the lender. | ||
:<span style="color:#4B0082">'''Example 2'''</span> | |||
:Another property is also valued at £400,000. | |||
:The outstanding amount of a loan secured on it is £200,000. | |||
:The loan to value ratio is 200,000 / 400,000 | |||
:= 50% | |||
All other things being equal, the loan in Example 2 carries lower risk for the lender. | |||
Revision as of 02:29, 11 February 2021
Banking.
(LTV).
Loan To Value is the ratio of the amount of a mortgage loan to the value of the residential property, or other asset, on which it is secured.
- Example 1
- A property is valued at £400,000.
- The outstanding amount of a loan secured on it is £300,000.
- The loan to value ratio is 300,000 / 400,000
- = 75%
The lower the LTV, the lower the risk for the lender.
- Example 2
- Another property is also valued at £400,000.
- The outstanding amount of a loan secured on it is £200,000.
- The loan to value ratio is 200,000 / 400,000
- = 50%
All other things being equal, the loan in Example 2 carries lower risk for the lender.
