What is LTV?
LTV stands for “Loan To Value” and is a term that is often thrown around by mortgage professionals because it is one of the key factors in determining the maximum loan amount and the interest rate. The LTV is simply the ratio of the loan amount to the value of the property. For example, if a property is worth $300,000 and the loan amount is $240,000 then the LTV is 80%.
For any given mortgage program from any lender there is a maximum LTV. If the particular mortgage program you are looking at has an 80% maximum LTV and you want to borrow $250,000 against a $300,000 property, you will have to find a different program or a different lender. Note that, all other things being equal, the higher LTV you want the higher interest rate you will pay and the harder it may be to qualify for the loan.
For instance, you may find that at lender has a program offering 80% LTV that you can qualify for with a 620 credit score. The same lender may require a 720 credit score for a 100% LTV.
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