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For the typical refinance, loan-to-value ratio also determines if you’ll need something like mortgage insurance, or if the lender will require extra protections. But, what is an LTV? Simply put, your LTV is the ratio of how much you owe on your current mortgage loan divided by the current value of your home.
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On the best-buy tables and comparison sites, you’ll see that lenders talk about the LTV (loan to value) ratio. This is the percentage of the property value you’re loaned as a mortgage – in other words, the proportion you’re borrowing. To calculate this, simply subtract your deposit/equity as a percentage of the property value from 100%.
Loan-To-Value Ratio and Commercial Loans This training article will teach you what kind of loan-to-value ratio you can expect when you apply for a commercial real estate loan. First I need to define the loan-to-value ratio. If you already
· Nearly half of existing borrowers have outstanding mortgage debts equivalent to less than 70% of the value of their home, while a further quarter have an equity cushion of between 10% and 30% of the property’s value. This means that borrowers overall hold unmortgaged housing wealth worth around £800 billion.
Your loan terms may be affected by the loan-to-value ratio, because the vehicle is the collateral for the loan, which means that if you default on your loan, the lender can take the vehicle. The lender may seek a down payment to reduce the size of the loan and make it less likely that the amount you owe on the loan will be more than the vehicle.
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Loan-to-value is a key factor in your ability to get approved for a mortgage. In general, lenders prefer loans with low LTV because loans with low LTV represent less risk to the bank.
Most lenders offer mortgage and home-equity applicants the lowest possible interest rate when the loan-to-value ratio is at or below 80%.
So when an underwriter is reviewing your application they’ll see your DTI is 26.25% / 35.75% which is pretty good. For conventional loans you typically want the ratio to be no more than 30% / 43% and for government loans (fha, for example) you can get away with a bit higher or a ratio, let’s call it 35% / 50%.