The “LTV” or Loan-to-Value ratio tells you how much equity you have in your home. Equity is the difference between how much your home is worth and how much you owe on it. For example, if your home is worth $250,000 and you owe $200,000 on your mortgage, you have $50,000 worth of equity in your home. To determine your LTV, divide your current loan amount by your home’s value. In this case, your LTV would be 80%.
LTV is important in determining your qualification for a home mortgage and the rate you receive. In general, the lower your LTV, the lower your rate will be. A higher LTV indicates that there is a greater risk the borrower may default on the loan.