LTV (Loan-to-Value)

Loan-to-Value (LTV) is a financial term that compares the amount of a loan to the value of the property being purchased. It is expressed as a percentage. For example, if you're buying a home worth $200,000 and you take out a loan for $160,000, your LTV is 80% ($160,000 ÷ $200,000). LTV helps lenders assess risk; a higher LTV means more risk since it indicates less equity in the property. Generally, lower LTVs can lead to better loan terms, such as lower interest rates, because they suggest a more secure investment for the lender.