LTV Calculator

Loan to Value Ratio Calculator

Loan to Value calculator (LTV) finds the ratio between the amount of loan you require and the cost of the purchased property. It can also find out the amount of loan from Loan to Value and the down payment.

You can calculate loan to value ratio with our LTV Calculator. It is free to use and does not ask users for site registration either.

What is LTV or Loan to Value Ratio?

The loan-to-value (LTV) ratio is a finance related term employed by lenders to represent the proportion of a loan to the value of purchased asset. The term is typically used by banks, Microfinance institutions and building organizations to express the ratio of the first mortgage as percentage value of the total assessed value of real property.

For example, if someone gets a loan of $120,000 to buy a house worth $140,000, the LTV ratio would be $120,000 to $140,000 or $120,000/$140,000. On a side note, the higher the loan to value ratio, the riskier the loan is for the lender.

The value of a property or in this case, a house, is usually determined by an appraiser, but a more elegant measure is an arm length transaction between a buyer and a seller.

Let’s say that you want to purchase a house but you can't afford it, though, unless you acquire a mortgage - the property amounts to a staggering $300,000. You have evaluated your budget capital and concluded that you have roughly $30,000 at your disposal for the down payment.

LTV meaning the proportion between the loan amount and the total buying cost. In this case, you would have to follow the steps shown below.

LTV Calculator

Although it’s possible to calculate LTV ratio manually. However, the math can be fuzzy and there is always that potential for the good ol human error. Therefore, ecalculator has developed this tool to calculate loan to value ratio at a lightning speed to save you time as well as from the cruel math.

Subtract the down payment from the total cost/price to acquire the loan:

$300,000 - $30,000 = $270,000

Divide the loan by the total price:

$270,000 / $300,000 = 0.9

Lastly, multiply this value with 100% to get LTV:

LTV = 0.9 * 100% = 90%

How to calculate LTV?

The loan to value ratio calculator employs two very simple formulas to determine the loan to value ratio of a transaction. You can use it in a number of ways for instance, you can put in the LTV and total cost of the property and let this tool do the rest of the work. It would conveniently give the rest of the value(s).

The two formulas are:

 Purchasing cost = down payment + loan

Intuitively, the total cost or price is the sum of the down payment (the sum of money you can pay from your account) and the loan that the bank offers you.

Loan to Value = loan / purchase price * 100%

As has been discussed earlier, this calculator describes the LTV ratio as the loan divided by the purchase cost, expressed in percentage.

It is easy to use this calculator, all you have to do is put in the purchase price and deposit amount if you wish to calculate the LTV percentage and the loan amount. If you want to compute the LTV and loan amount using the loan value and purchase value then you can do that as well.

On the other hand, if you want to compute the loan amount and deposit amount, you can put in the purchase price and the LTV value and determine those as well.

As has been discussed above already, our LTV calculator is free to use. It does not charge its users money. Cherry on top? You won’t have to register to the site to use this tool either and you can use it as many times as you like.

Risk Evaluation

LTV Ratio is a key risk factor that lenders analyzes loan borrowers for mortgage. As risk of default is always one of the most significant factors considered in lending decisions and probability of a lender facing a loss increases as equity decreases.

Therefore, when a loan’s LTV ratio increases, the qualification criteria for certain mortgage plans become much tougher.

Lenders can validate borrowers with high LTV mortgage insurance to protect themselves from the purchaser's default, which increases the mortgage cost.

Low loan to value ratios for example below 80% carry lower rates for low-risk borrowers and enables lenders to consider high-risk borrowers, for example those that have lower credit scores, higher ratios for debt-to-income, higher loan amounts or requirements for cash outs, no sufficient reserves or  little to no income.

High Loan to Value ratios are basically reserved for borrowers with high credit scores and a reasonable and convincing mortgage history.

100% LTV on the other hand, is set aside for only the ones that are most credit worthy.

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