Results
LTV Ratio: –
Risk Category: –
Overview
The Loan-to-Value (LTV) Ratio Calculator helps you quickly assess the risk level of a loan in relation to the value of the secured property. It’s a critical measure used by banks and lenders during mortgage and loan approvals.
The lower the LTV ratio, the lower the risk for lenders — meaning better loan terms and interest rates for borrowers.
Formula & Methodology
The formula used for LTV ratio is:
LTV (%) = (Loan Amount ÷ Property Value) × 100
This result is then classified into a risk category:
- Low Risk: LTV ≤ 60%
- Moderate Risk: 61% – 80%
- High Risk: 81% – 90%
- Very High Risk: LTV > 90%
Examples
- Loan: $80,000, Property: $100,000 → LTV = 80% (Moderate Risk)
- Loan: €120,000, Property: €150,000 → LTV = 80% (Moderate Risk)
- Loan: £95,000, Property: £100,000 → LTV = 95% (Very High Risk)
Use Cases
- Check mortgage eligibility for home purchases
- Refinancing decision support
- Risk classification before loan application
- Evaluate down payment impact
FAQ
What is a good LTV ratio?
Typically, lenders prefer LTV ratios of 80% or less. This often avoids the need for mortgage insurance and may offer better rates.
How can I reduce my LTV?
You can lower your LTV by increasing your down payment or purchasing a lower-priced property.
Does LTV affect interest rates?
Yes, lower LTV ratios are generally associated with lower interest rates since they indicate lower lender risk.