LTV

LTV - 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

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.

Although all lender banks prefer Loan-to-Value Ratios of 80% or lower, there are banks that offer mortgage loans above 80% LTV. Some lenders require that the borrower carry Private Mortgage Insurance. Others charge a higher interest rate to justify the added risks.

Mortgage brokers are often asked by real estate agents and buyers to base their loan on the appraised value rather than the purchase price. Their claim is that they have negotiated a super deal and that the property is worth much more than what they are paying for it. This may be so (although generally untrue), but lenders always base their maximum loan on the lower of purchase price or appraisal. The lender's argument (its their money, so there is really very little argument) is that an appraisal is really no more than an estimate of fair market value, no matter how competent or conscientious the appraiser may be. The only true indicator of value is the marketplace in which "a willing buyer and a willing seller, each in full knowledge of the salient facts, and neither under undue pressure, agree upon terms." If the property sells for "X," then it is probably only worth "X."

CLTV - CLTV, also know as Closing Loan to Value, is the percentage of how much a house is worth compared to how much is owed on all mortgages on the property.
Example: House is worth $300,000 and 1st mortgage balance is $130,000 and second mortgage balance is $80,000 (total of mortgages is 130k + 80k = 210k)

A loan that is 100% CLTV means that you owe the same amount that the home is worth - you have no equity.

Many times you will need to do a second mortgage at a different bank than the first, as to avoid a conflict - due to Combined Loan to Value(CLTV) guideline restrictions on the first mortgage that is also financed by the same bank.

CLTV is also referred to as combined loan to value and is used by lenders to figure the overal risk of a loan. The higher the combined loan amount compared to the properties value will affect what programs and rates you will qualify for.

What is the maximum Loan-to-Value (LTV)? - This question is difficult to answer without knowing the specific details of your loan. Call me now at 888-418-4467 and I will discuss this with you and help you find out what the maximum Loan-to-Value in your situation is. Depending on your specific situation, it may be possible to get a loan for up to 125% of the value of your home.

Higher LTVs usually result in higher interest rates. There are loans available to 125% LTV but the interest rate is more similar to a credit card rate than to a mortgage rate.

One factor that determines your maximum LTV is your credit score. Lenders do not want to lend a high LTV if you have a low credit score. Generally, if your score is below 580, you will have a difficult time qualifying for 100% financing. Realize that your credit score is used to help determine your likelihood of defaulting on the loan. If a lender sees you as being more likely to default on the loan, then they don’t want to extend credit beyond what they will be able to recover if they are forced to foreclose.

Loan-to-Value, or LTV as it is commonly referred to, is the ratio of loan amount to the value of a property. The maximum LTV ratio may not exceed 100 percent of the "as-improved" value as determined by an appraisal. The loan-to-value ratio (or LTV) is one of the most important factors in your loan process. It is how the loan limits are determined and helps decide where your housing and debt ratios must fall for you to be approved. In addition it helps determine if you will have to pay Private Mortgage Insurance (PMI) and if you will be forced to escrow or not. It can also determine which fees and the amount(s) you will be charged for your loan.