Loan-to-value Ratio (LTV)

Loan-to-Value Ratio (LTV) is a financial metric used by lenders to assess the risk of lending funds. It is calculated by dividing the amount of the loan by the appraised value of the property or asset being purchased, expressed as a percentage. A lower LTV indicates less risk for the lender, potentially resulting in better loan terms for the borrower. Conversely, a higher LTV suggests greater risk, which may lead to higher interest rates or the requirement for private mortgage insurance.