Combined loan-to-value ratio

What is combined loan-to-value ratio?

Combined loan-to-value ratio, or CLTV, is a borrower’s overall mortgage debt load, expressed as a percentage of the home’s fair market value.

Deeper definition

When someone is buying a home, a lender will look at the loan-to-value (LTV) ratio. This is calculated by taking the appraised value and dividing that into the amount of the loan the borrower seeks. The maximum mortgage for a home purchase is typically 90 percent to 95 percent, depending on the program. Combined loan-to-value is used when there is more than one mortgage, such as the primary mortgage and an equity line of credit. The combined loan-to-value ratio is the total of both loans added together and then divided into the appraised value.

Combined loan-to-value ratio example

The first step to determining combined loan-to-value ratio is to know the appraised value of a home. Let’s take a home worth $500,000, for which the buyer took out a primary mortgage of $250,000. The buyer later took out a home equity loan of $100,000. Here is how the combined loan-to-value ratio would be calculated:

• Primary mortgage ($250,000) + home equity loan ($100,000) = $350,000
• Total mortgage debt = $350,000 / appraised value ($500,000) = 0.7 or 70 percent CLTV

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