Loan to value
Today is a real estate of the day is loan to value or LTV, loan to value is a percentage relationship between the amount of the loan and the appraised value and or the sales price, whichever is lower of the two. Ok, so within here there is something to actually look at.
So LTV is the lower of the two of the sales price or the appraised value. So if we use a simple case and when explaining this, I like to look at base of like one hundred thousand.
So in the case, if you purchased a property for one hundred thousand and that was a purchase price and you had a loan of eighty thousand, you would be at 80 percent LTV loan, 80 purchase price one hundred.
However, if the property did not appraised for one hundred thousand or more and it appraised for less, let’s say that it came in just under one hundred thousand, it came in at ninety nine thousand.
Now your loan at eighty eighty thousand would not be in eighty percent because you’d have an eighty thousand loan in a ninety-nine thousand appraisal. They use the lesser of the two.
So you’d be just above 80 percent. And if you want an 80 percent LTV, then you would be forced to put additional money down and lower your loan amount because your new appraised value is ninety nine thousand.
Just an example and use that for the distinct reason to define LTV and using the lesser of appraised value or purchase price. Thank you.