What is Loan to Value (LTV)?
Understanding Loan to Value Ratio Loan to Value (LTV) ratio is a key concept in the mortgage world. It represents the percentage of the property’s value that you are borrowing through a mortgage. For example, if you’re purchasing a home worth £200,000 and have a £20,000 deposit, your mortgage would be £180,000, making your LTV 90%. LTV is a crucial factor for lenders as it helps determine the risk associated with the loan. How to Calculate LTV Ratio To calculate the LTV ratio, divide the amount of the mortgage by the total value of the property and then multiply by 100 to get a percentage. For instance: Property Value: £250,000 Deposit: £50,000 Mortgage Amount: £200,000 The calculation would be: LTV=(200,000250,000)×100=80%\text{LTV} = \left( \frac{200,000}{250,000} \right) \times 100 = 80\%LTV=(250,000200,000)×100=80% This means the LTV is 80%, indicating that the mortgage covers 80% of the property’s value. Why is LTV Important? LTV is significant for both le...