LTV, also known as Loan to Value, is the percentage of what a house is worth compared to the amount of the mortgage owed on the property.
Example: House is worth $200,000 and mortgage balance is $150,000
LTV = 75%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.
