The loan to value ratio affects the amount of money a borrower can borrow in two ways. First, a lower LTV ratio is seen as lower risk and may result in a lower interest rate or a larger loan amount. Second, a higher LTV ratio is seen as higher risk and may result in a higher interest rate or a smaller loan amount.
For example, if an apartment building has an appraised value of $1 million and the lender is providing a loan for $700,000, the LTV ratio is 70%. This means that the lender is loaning 70% of the value of the property. The maximum LTV ratio will depend on the lender and the type of property. Generally, lenders will offer lower ratios for higher-risk properties and higher ratios for lower-risk properties.