Loan-to-Value Ratio (LTV)
The ratio between the amount of a mortgage and the appraised value of a property is the loan-to-value ratio. For instance, a $200,000 mortgage on a $275,000 home equates to an LTV of 73%. The higher the percentage, the riskier the loan; the lower the percentage, the more equity a homeowner has in the property. Lenders examine this ratio before approving a loan and may require a borrower to purchase mortgage insurance or charge more for the mortgage if the ratio is above 80 percent.