Conquer the Georgia MLS Exam 2026 – Unlock Your Real Estate Success Today!

In real estate transactions, LTV stands for Loan to Value. This is a financial term that represents the ratio of a loan to the value of the property being purchased. It is calculated by dividing the loan amount by the appraised value or purchase price of the property, whichever is lower, and is typically expressed as a percentage.

The LTV ratio is an important metric used by lenders to assess risk in mortgage lending. A higher LTV ratio indicates that the borrower is financing a larger portion of the property's value with debt, which can signal higher risk to lenders. Conversely, a lower LTV ratio is generally seen as a sign of lower risk, as it indicates that the borrower has a larger equity stake in the property.

This metric is crucial for determining loan eligibility, interest rates, and insurance requirements, further influencing the overall terms of a mortgage. Understanding LTV is fundamental for buyers and real estate professionals as it directly impacts financing options and investment strategies.