1. What is Loan To Value (LTV)?

The Loan To Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. For home equity, it represents the percentage of your home's value that is mortgaged.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• \( \text{Mortgage Balance} \) — Current outstanding mortgage amount (USD)
• \( \text{Home Value} \) — Current market value of the property (USD)

Explanation: The equation calculates what percentage of your home's value is currently mortgaged.

3. Importance of LTV Calculation

Details: LTV is crucial for determining home equity, qualifying for refinancing, and assessing risk for lenders. Lower LTV ratios generally mean better loan terms.

4. Using the Calculator

Tips: Enter your current mortgage balance and your home's estimated current market value. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio?
A: Generally, an LTV of 80% or lower is considered good, as it often eliminates the need for private mortgage insurance (PMI).

Q2: How does LTV affect home equity loans?
A: Lenders typically require LTV ratios below 80-85% for home equity loans or lines of credit.

Q3: Can LTV change over time?
A: Yes, as you pay down your mortgage and/or your home's value changes, your LTV ratio will change.

Q4: How is LTV different from CLTV?
A: CLTV (Combined Loan To Value) includes all liens on the property, not just the primary mortgage.

Q5: Why is LTV important for refinancing?
A: Better LTV ratios often qualify for lower interest rates and better loan terms when refinancing.