How to Calculate Home Value to Loan Ratio

If you want to buy a house, you will probably need to take out a loan in order to do so. A loan for a house is referred to as a mortgage, and lenders want to know how much of the value of the home you need to finance. The more down payment you can provide, the lower risk you are to the lender. The amount of the down payment compared to the value of the home is referred to as the loan to value ratio.

Things You'll Need

• Calculator or spreadsheet

Instructions

1. Review the formula: Mortgage ÷ Appraised Value = LTV.

2. Determine the selling price or appraised value of the property. You also need to know the available down payment.

3. Walk through an example. Let's assume your home is selling for $200,000. Buyers have $50,000 available for down payment. The desired mortgage amount is $200,000-$50,000 = $150,000.

4. Divide the desired mortgage amount by the current selling price. The equation is: $150,000 / $200,000 = .75.

5. Convert the result to a percentage. 0.75 x 100 = 75 percent, which is the LTV ratio.

References

• Lendingtree: Loan to Value Ratios