LTV Calculator
Loan-to-Value (LTV) is a term used to describe the ratio of a loan amount to the value of the property being purchased. It’s a key factor that lenders consider when deciding whether to approve a mortgage and what the interest rates will be.
A lower LTV ratio generally means less risk for the lender, which can result in better loan terms for you.
To use the LTV calculator, simply enter the value of the property and the amount of the loan you need. The calculator will then show you the LTV ratio.
This helps you understand your financial position and see how much equity you have in the property. It’s a handy tool for making informed decisions about your mortgage options. If you need further assistance, connect with our team; we are here to help you.
What is Loan-To-Value Ratio?
The Loan-to-Value (LTV) ratio is a term used in mortgages and loans. It shows how much of the property you’re buying is being paid for by the loan compared to how much you’re paying upfront with your own money (down payment).
For instance, if you’re getting a mortgage of $150,000 to buy a home worth $200,000, your LTV ratio is 75%. This means the loan covers 75% of the home’s value, and you’re paying the remaining 25% yourself.
Why Is LTV Important?
LTV matters a lot to both lenders and borrowers. For lenders, a lower LTV means less risk because the borrower owns more of the property. For borrowers, a lower LTV can lead to better loan offers, like lower interest rates and smaller monthly payments.
On the other hand, a higher LTV might mean you need to get private mortgage insurance (PMI) and could result in higher interest rates.
How To Calculate LTV?
Calculating your LTV is straightforward with our LTV calculator. But, if you’d like to manually calculate, here’s how.
You simply divide the loan amount by the property’s appraised value or purchase price, whichever is lower, and then multiply by 100 to get a percentage.
LTV = (Mortgage amount / Property value) x 100
For example:
If you need a loan of $200,000 for a property valued at $250,000, your LTV would be 80% ($200,000 / $250,000 * 100)
OR
LTV = ((Property value – Deposit) / Property value) x 100
For example:
If your property is worth $300,000 and you have a down payment of $60,000, your LTV would be 80% (($300,000 – $60,000) / $300,000 * 100).
What Is a Good LTV?
A “good” LTV typically falls below 80%. This means you’re borrowing less than 80% of the property’s value.
If your LTV is above 80%, it may be more difficult to secure a loan and you may be subject to additional fees, such as PMI.
- Above 80%: High LTV
- Below 80%: Good LTV. You may qualify for better loan terms.
- Below 75%: Excellent LTV. You may qualify for the best loan terms, including lower interest rates.
LTV ratios can differ based on the lender and loan type. However, the ideal LTV often depends on factors like credit score, income, and debt levels. Typically, a lower LTV is seen as less risky for both lenders and borrowers.
How To Use Our Loan-To-Value Calculator?
Using our calculator is easy:
- Enter the estimated or appraised value of the property.
- Input the loan amount you’re seeking.
- Click “Calculate” to see your LTV ratio.
The calculator will instantly display your LTV percentage, giving you a clear picture of your borrowing position.
What Do Your Results Mean?
Your results will show your LTV percentage, which helps you understand how much of the property’s value you are borrowing.
- LTV below 80%: You’re in a good spot and might get better loan conditions.
- LTV between 80%-90%: You might face less favourable loan terms, but it’s still manageable.
- LTV above 90%: This could be risky for lenders, which may lead to higher interest rates. Consider increasing your down payment to lower the LTV.
This tool helps you clearly understand your LTV, so you can make smart choices when getting a mortgage or refinancing your home.