What is a loan-to-value ratio?

A loan-to-value ratio (LTV) is a measure used in mortgage law in Colorado that expresses the ratio of a loan amount to the value of the property. This ratio helps to determine the amount of risk a lender is taking on in a mortgage. Generally, a higher LTV, meaning a larger loan amount relative to the property’s value, is riskier for the lender. For example, a lender may require a higher down payment for an LTV of 90%, as opposed to an LTV of 80%. The LTV ratio is used to help lenders decide the maximum loan amount for which a person can apply. Generally, lenders want the LTV ratio to be low, meaning that the loan amount is only a small portion of the overall property value. For example, if a person puts at least 20% down on a house, the LTV ratio for that mortgage will be 80%. The lower the LTV ratio, the more likely the lender is to approve a loan. The loan-to-value ratio is an important part of mortgage law in Colorado and is used by lenders to determine the risk taking on when approving a loan. An LTV ratio that is too high can impact a person’s chances of getting approved for a loan. On the other hand, an LTV ratio that is too low can make it difficult for the borrower to qualify for a large enough loan to cover the cost of a down payment or their desired property.

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What is a loan-to-value ratio?

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