Loan-to-value ratio, equity

Question 1

What is the Loan-to-value (LTV) ratio?

Answer 1

The loan as a percentage of the purchase price

The LTV ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

Question 2

What is equity?

Answer 2

Equity is the difference between the value of the property and the mortgage debt

Equity represents the ownership value in a property after accounting for any outstanding mortgage obligations.

Question 3

How do you calculate the loan-to-value ratio (LTV ratio)?

Answer 3

Loan amount / sales price = LTV ratio

This formula helps lenders assess risk in providing loans.

Question 4

What is the Loan-to-value (LTV) ratio when given down payment?

Answer 4

price - down payment = loan amount; loan amount / sales price = LTV ratio

This calculation is vital for determining the amount of financing relative to the property’s value.