Loan-to-Value Ratio Calculator
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There are many things a lender must consider before approving your application for a loan. One of the most important considerations is a metric called the Loan-to-Value ratio (LTV). The Loan-to-Value (LTV) ratio is a financial metric used by lenders to assess the risk associated with a loan.
For example, if you want to buy a property worth $400,000 and you need a loan for $300,000, your LTV is 75% because the loan value, $300,000, is 75% of the value of your $400,000 home. The higher the LTV, the larger the loan or mortgage you need to buy a property.
The LTV Calculator Is a Handy Tool for Borrowers and Lenders Alike
The LTV is considered by lenders to be an effective indicator of the riskiness of a borrower. A higher LTV means higher risk to the lender. A low LTV (e.g. 35% indicates that you are a less risky borrower. From the perspective of a lender, a low LTV suggests that you have earned or saved enough money to manage most of the purchase yourself, and therefore, you are likely better able to maintain the loan’s required payments compared to someone with a high LTV. A high LTV will often result in higher interest rates and fees for a loan or mortgage due to the added level of risk for the lender.
By knowing your LTV, you can make an educated estimate about what kinds of funds you could receive from different lenders. Major financial institutions like banks and credit unions calculate a combination of LTV as well as your credit score and income to determine if you are eligible for approval of a loan or mortgage.
Private mortgage loan lenders approve loans based mostly on home equity, and they use LTV to determine if you meet their requirements.
Other Requirements
While major financial institutions have several requirements for loan approval, private lenders require your home equity and use the location of your home to determine the maximum amount of equity you can use to secure the loan. With the LTV calculator, you can find out if you qualify for a private loan and how much you can borrow based on your home equity. This information can help you better negotiate a fair deal with a lender.
Knowing what kind of financing you can get and what it will cost each month can help you prepare a budget to manage your required payments, reducing the chances that you miss or make a late payment. With this information, you can strategize how you can buy a home, renovate, consolidate debt and make investments.
Population Sizes
Communities with a population below 30,000 are considered small towns. If your home is in a small town, private lenders can secure loans up to 65% of your home’s LTV.
Mid-sized cities have a population between 30,000 and 200,000, while large cities have more than 200,000 residents. Private lenders can provide loans up to 70% of your home’s LTV in mid-sized cities and up to 75% LTV in large cities. Remember, the LTV is just a comparison of the value of your home and the loan you secure with it. As you pay off your mortgage or loan, your LTV will go down.
To calculate your LTV, follow the simple steps in the LTV calculator. Enter the estimated value of the home you are interested in, your requested loan amount, and the type of mortgage you want in the three text fields below, then click the button ‘Calculate Your Loan-To-Value Ratio.’ The calculator will give you an instant result.
Loan-to-Value Calculator
Loan-to-Value Calculator
Estimate the loan-to-value ratio by comparing total secured mortgage debt against the property value.
Your loan-to-value
Adjust the property value and mortgage amounts to calculate your loan-to-value ratio.
Calculator results are estimates only and do not constitute a mortgage approval, commitment to lend, rate quote, or financial advice. Actual mortgage payments, rates, fees, and qualification requirements may vary.
Loan-to-Value Calculator FAQ
Answers to common questions about this Mortgage Broker Store page.
What does loan-to-value mean?
Loan-to-value compares the total secured debt against the property value. It is one of the main numbers lenders use to decide risk and maximum loan amount.
Why is LTV important for private mortgages?
Private lenders often rely heavily on equity. A lower LTV can improve lender options, while a higher LTV can limit approval or increase pricing.
What debts should be included in LTV?
Include the first mortgage, second mortgage, secured line of credit, tax liens, and any other debts registered against the property.
Can an appraisal change my LTV?
Yes. If the appraised value is higher or lower than expected, the LTV and available borrowing amount can change.
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