Question:

How to calculate loan to value ratio (LTV)?

Answer:

Knowing how to calculate loan to value ratio (LTV) comes handy when applying for a mortgage loan. Given that the lower the LTV, the lower the monthly payment you should know the LTV of your home loan to estimate monthly housing expenses.

Loan to Value Ratio (LTV) Calculation

You need the appraised market value of the property (or the sales price) and the down payment you are ready to provide.

For example, if you are ready to make $30,000 down payment on a house worth $210,000 you can:

  • Divide $30,000 by $210,000 to obtain approximately 0.14.
  • Subtract 14 from 100 and this is your loan to value ratio - 86%.

Another approach for obtaining the loan to value ratio (LTV) is by subtracting $30,000 from $210,000. This makes 180,000. Now, divide 180,000 by 210,000 and multiply by 100. The result is 85.7 or approximately 86%.

Loan to value ratio (LTV) calculations are important to determine if you are going to pay private mortgage insurance and how much it would cost. Loans with LTV of 80% and lower are exempt of MIPs - mortgage insurance premiums.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 3/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: