Combined Loan-To-Value Ratio (CLTV)

The Combined Loan-To-Value (CLTV) ratio is a metric used in the lending industry during the underwriting process, particularly in the context of real estate financing. It is a measure of the total amount of debt outstanding on a property relative to its value. 

The CLTV ratio considers not only the primary mortgage loan but also any additional loans or liens secured by the same property, such as a home equity loan or a second mortgage. It is calculated by dividing the sum of all outstanding loan balances by the property’s appraised value or purchase price.

The formula for calculating CLTV is:

CLTV = Total Amount of All Loans / Total Value of the Property X 100

For example, if a borrower has a $200,000 mortgage and a $50,000 home equity loan on a property valued at $300,000, the CLTV ratio would be: CLTV = ($200,000 + $50,000) / $300,000 = 0.83 or 83%

Lenders use the CLTV ratio to evaluate the combined risk of all loans on the property. A higher CLTV indicates greater risk, as it means a larger portion of the property’s value is financed through debt.