How Do I Calculate LTV?
LTV is short for loan-to-value, which is a ratio that measures the amount you owe on your mortgage versus the amount your home is worth. The LTV ratio is used by lenders to measure the risk you pose as a borrower. The lower your LTV, the less risky your loan because you have more money invested in the value of the home. If the value of the home decreases and you default, the lender has a cushion before they home drops below the amount you owe. The LTV ratio is also important in determining whether you must still pay for private mortgage insurance.
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Instructions
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Have your home appraised. If you just want an approximate LTV ratio, you can estimate the value of your home. However, if you want to prove the LTV has dropped below 80 percent so you can stop paying for private mortgage insurance, most lenders will require an official appraisal.
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Contact your financial institution or check your financial records to determine how much you still owe on your mortgage.
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Divide the amount of money you owe by the value of your home. For example, if you owe $340,000 on your mortgage and your home is valued at $400,000, you would divide $340,000 by $400,000 to find your LTV ratio equals 0.85, or 85 percent.
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References
- Photo Credit new home 3 image by Kathy Burns from Fotolia.com
