Loan-to-Value Ratio (LTV)
Quick Definition
The percentage of a property's value financed by a mortgage.
Full Explanation
The Loan-to-Value ratio is calculated by dividing the mortgage amount by the appraised property value, expressed as a percentage. For example, a $380,000 mortgage on a $400,000 home yields an LTV of 95%. In Canada, LTV determines insurance requirements (CMHC insurance required above 80% LTV), interest rate pricing (lower LTV typically gets better rates), and maximum allowable amounts. HELOCs can be obtained up to a combined LTV of 80%. Lenders view lower LTV ratios as lower risk.
Related Terms
Mortgage
A secured loan used to purchase real estate, with the property as collateral.
Down Payment
The upfront cash you pay toward a home purchase, expressed as a percentage of purchase price.
CMHC (Canada Mortgage and Housing Corporation)
Federal Crown corporation that provides mortgage default insurance for high-ratio mortgages.
HELOC (Home Equity Line of Credit)
A revolving credit line secured by your home equity, up to 80% LTV.
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