Loan-to-Value (LTV) Ratio
Compares a loan amount to the underlying asset’s value.
Detailed Description
Loan-to-Value (LTV) Ratio
What does a lower LTV ratio indicate?
A lower LTV ratio typically indicates a lower risk for the lender, suggesting the borrower has a greater equity stake in the property.
What is the maximum LTV ratio for conventional loans?
Lenders typically set maximum LTV limits around 80% for conventional loans.
What happens if a borrower exceeds the maximum LTV ratio?
If a borrower exceeds the maximum LTV ratio, they may be required to pay for Private Mortgage Insurance (PMI).
How does a high LTV ratio affect interest rates?
A high LTV ratio often results in higher interest rates, as lenders perceive greater risk.
What are the variations of LTV ratios mentioned?
Variations include Combined Loan-to-Value (CLTV) ratio and Home Equity Loan-to-Value (HELTV) ratio.