Loan to Value (LTV) Ratio Calculator

Calculate Loan to Value Ratio





Definition

The loan to value (LTV) ratio is the ratio between the loan amount and the total purchase price. It is commonly used when buying a property. The LTV ratio helps lenders assess the risk of lending money for the purchase.

Formulas

The formula to calculate the loan amount:

\[ \text{Loan Amount} = \text{Purchase Price} - \text{Down Payment} \]

The formula to calculate the Loan to Value (LTV) ratio:

\[ \text{LTV} = \left( \frac{\text{Loan Amount}}{\text{Purchase Price}} \right) \times 100\% \]

Example

Imagine that you want to buy a house that costs $200,000. You have $20,000 available for the down payment. Here’s how you calculate the loan amount and the LTV ratio:

This means that the loan represents 90% of the market value of the property.