UK Accounting Glossary
In real estate finance, the loan-value ratio is simply the ratio of the value of debt to the appraised value of the property. The loan-value ratio is more often called LTV, for loan to value ratio. For example if a property is appraised at $1,000,000, a loan-value ratio of 70% implies mortgage debt for $700,000. A no money down transaction is a deal with a loan-value ratio of 100%. In the US, an important loan-value ratio is 80%. Getting financing for commercial properties is easier if the loan-value ratio is 80% or less. A residential mortgage with a higher than 80% LTV may require private mortgage insurance, or PMI. If there is more than one loan on a property or transaction, the total loan-value ratio is the ratio of the total loans to the property value.
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This glossary post was last updated: 10th February 2020.