mortgage

What is a loan-to-value ratio?

 

What is loan-to-value ratio?

The Bankrate.com financial term of the day is: "Loan-to-Value Ratio," or "LTV"

Loan-to-value ratio, or LTV, is a fancy term for a fairly simple concept: the share of a home's value that's covered by a mortgage. So, if you buy a $100,000 house with $20,000 down and must borrow $80,000 for the rest, the loan amounts to 80 percent of the home's value. That's a loan-to-value ratio of 80.

A loan-to-value ratio, or LTV, greater than 80 will typically cause your lender to require that you pay for private mortgage insurance, a dreaded monthly cost on top of your mortgage payment.

To find a great rate on a home loan, visit the Mortgages section at Bankrate.com.

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