An Loan-to-Value (LTV) ratio calculator helps you determine the LTV ratio of a loan based on the appraised value of the asset or property and the loan amount. Here's how you can calculate the LTV ratio:
- Determine the appraised value of the asset or property. For example, let's say the appraised value of a property is $500,000.
- Determine the loan amount. For example, let's say you're taking out a mortgage of $400,000 to purchase the property.
- Divide the loan amount by the appraised value of the property and multiply by 100 to get the LTV ratio as a percentage. In this example, the LTV ratio would be 80% (($400,000 ÷ $500,000) x 100).
Alternatively, you can use an online LTV ratio calculator to make this calculation easier. Simply input the appraised value and the loan amount, and the calculator will give you the LTV ratio.
Knowing the LTV ratio is important for borrowers, as lenders often use it to determine the risk level of a loan and may have different requirements based on the LTV ratio. It can also impact the cost of the loan, such as by requiring private mortgage insurance (PMI) if the LTV ratio exceeds a certain threshold.
