Loan-To-Value Ratio (Ltv)

The loan-to-value ratio (LTV) is a financial metric used to assess the amount of risk involved in extending a loan. It is the ratio of the total loan amount to the market value of an asset. A lender may use this ratio to determine whether or not to extend a loan, as well as how much money should be lent and at what interest rate.

LTV is one of the most important metrics in lending, as it is an indicator of how much equity a borrower has in their property and consequently, how likely they are to default on their payments.

Generally speaking, the lower the LTV, the lower the risk for lenders and thus, more favorable terms may be offered. Conversely, higher LTVs represent higher risk for lenders and typically result in less favorable terms for borrowers.