If your LTV is higher than 80%, you may be required to pay mortgage insurance. Mortgage insurance is an insurance policy that protects the lender, and has absolutely no benefit to the consumer. You can avoid paying mortgage insurance by splitting your loan into two separate mortgages. Your second mortgage will have a higher interest rate, but will usually save you money over paying for mortgage insurance.

Loan to value (LTV) calculations are used when determining risk grades of your loan which will be reflected in your qualifying rate.

Because of Loan to Value(LTV) program and guideline restrictions, a proper and correct appraisal is an extremely important part of the loan process, to both the lenders as well as the borrowers.

Although all lender banks prefer Loan-to-Value Ratios of 80% or lower, there are banks that offer mortgage loans above 80% LTV. Some lenders require that the borrower carry Private Mortgage Insurance. Others charge a higher interest rate to justify the added risks.

Mortgage brokers are often asked by real estate agents and buyers to base their loan on the appraised value rather than the purchase price. Their claim is that they have negotiated a super deal and that the property is worth much more than what they are paying for it. This may be so (although generally untrue), but lenders always base their maximum loan on the lower of purchase price or appraisal. The lender's argument (its their money, so there is really very little argument) is that an appraisal is really no more than an estimate of fair market value, no matter how competent or conscientious the appraiser may be. The only true indicator of value is the marketplace in which "a willing buyer and a willing seller, each in full knowledge of the salient facts, and neither under undue pressure, agree upon terms." If the property sells for "X," then it is probably only worth "X."