Loan to value

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.

See also

• Covenant
• Foreclosure
• Mortgage
• Mortgage-backed securities (MBS)
• Risk
• Security