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Simple English definitions for legal terms
LTV ratio
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A quick definition of LTV ratio:
The LTV ratio is a number that shows how much money you borrowed for a mortgage compared to the value of the property you used as collateral. For example, if you borrowed $80,000 for a house worth $100,000, your LTV ratio would be 80%. This number is important because it helps lenders decide how much risk they are taking by lending you money. Generally, the higher the LTV ratio, the riskier the loan.
A more thorough explanation:
The LTV ratio, also known as the loan-to-value ratio, is a percentage that represents the amount of a mortgage loan compared to the value of the property used as collateral for the loan.
For example, if a person takes out an $80,000 mortgage loan on a property worth $100,000, the LTV ratio would be 80%. This is typically the highest ratio that lenders will allow without requiring the borrower to purchase mortgage insurance.
The LTV ratio is important because it helps lenders determine the risk of lending money to a borrower. A higher LTV ratio means there is a greater risk of the borrower defaulting on the loan.
Here is another example: If a person takes out a $200,000 mortgage loan on a property worth $250,000, the LTV ratio would be 80%.
Overall, the LTV ratio is a key factor in the mortgage lending process and can impact the terms and conditions of a loan.