Loan to value (LTV) is a measure of the size of a mortgage loan in relation to the value of the property being purchased. It is expressed as a percentage and is calculated by dividing the mortgage loan amount by the value of the property.
For example, if a borrower is seeking a mortgage loan of £100,000 to purchase a property valued at £200,000, the LTV would be 50%. If the borrower is seeking a mortgage loan of £150,000 to purchase the same property, the LTV would be 75%.
Lenders use LTV as a way to assess the risk of a mortgage loan. In general, the higher the LTV, the greater the risk to the lender, as there is less equity in the property to act as security for the loan. As a result, lenders may be more hesitant to approve mortgages with high LTVs, or may require additional collateral or more favourable terms in order to mitigate the risk.
For borrowers, LTV is an important consideration, as it can affect the terms and conditions of the mortgage, including the interest rate and fees. It is important for borrowers to understand their LTV and to work with their lender to find a mortgage solution that meets their needs and goals.
