Loan to value

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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