Calculate a Property"s Loan to Value Ration in 2 Easy Steps

106 11

Lenders will provide mortgages based on many factors, one being the loan to value ratio of the property. The type of property, whether owner occupied or investment, will usually determine different maximum allowable LTV ratios.

This ratio is expressed as a percentage and is derived by dividing the mortage amount by the lesser of the selling price or appraised value.

Difficulty: Easy

Time Required: 5 minutes

Here's How:
  1. Using the selling price or appraised value of the property, determine the available or desired down payment and the desired mortgage amount that would be needed.
    Home selling for $300,000, and the buyers have $40,000 available for a down payment.

    $300,000 - $40,000 = $260,000 desired mortgage amount.
  2. Divide the mortgage amount by the selling price and convert the result to a percentage.
    $260,000 / $300,000 = 0.87 or 87% which is the LTV ratio.

  1. Though you may be buying a property below the appraised value, and considering it a bargain, the lender will use the lower purchase price in this calculation.

What You Need:
  • Calculator
Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.
You can unsubscribe at any time
You might also like on "Business & Finance"

Leave A Reply

Your email address will not be published.