What Is Loan to Value Ratio in Real Estate?

Loan to Value Ratio Meaning

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Loan to Value Ratio Definition

Loan-to-Value or LTV in short is the ratio of a mortgage loan amount to the property's appraised value expressed as a percentage. For example, if you're purchasing a hundred thousand dollar property and you put 20% down payment, your loan to value is 80%.

It's calculated by dividing the loan amount by the property's appraised value and then multiplied by a hundred to express it as a percentage. The LTV is used when determining loan programs, interest rates, and private mortgage insurance (PMI) requirements.

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Loan to Value Ratio Formula

Loan to Value Ratio (LTV) = (Loan amount / Property value) * 100

Example: Let’s say a borrower’s mortgage loan amount is $200,000, value of the property is $400,000. Therefore, the Loan-to-Value ration or LTV is ($200,000/$400,000) * 100 = 50%

Need assistance with calculating your loan to value ratio? Use our free online loan to value calculator! 

Loan to Value Ratio Definition Author

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Kristina Morales

Real Estate Contributor

Kristina Morales is the Real Estate Contributor at Loanfully, an online educational resource for borrowers and industry professionals. Kristina is both a licensed mortgage loan originator and real estate agent in the State of Ohio. Inspired by her years of working with buyers and sellers and seeing a need for more consumer education, Kristina created loanfully.com. In addition to real estate sales and mortgage lending, Kristina had an extensive corporate career in banking, treasury and corporate finance. She ended her corporate career as an Assistant Treasurer at a publicly traded oil & gas company in Houston, TX. Kristina obtained her MBA from the Weatherhead School of Management at Case Western Reserve University and her B.A in Business Management from Ursuline College.

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