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Loan-to-Value Ratio
Loan-to-value ratio compares the amount financed with the property's appraised value.
The loan-to-value ratio compares the amount financed with the property's appraised value. It expresses how much of that value is financed by the loan.
Mortgage lenders use LTV as one factor in evaluating a loan and its terms. A larger down payment reduces the financed share when the property value is unchanged. LTV alone does not establish a borrower's ability to repay.
Source: CFPB: Loan-to-value ratio.
Frequently Asked Questions
Does a larger down payment affect LTV?
Yes. With the same property value, a larger down payment reduces the amount financed and lowers the loan-to-value ratio.
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