Question

Jane’s offer of $310,000 was accepted, but the appraisal just came in at $300,000. jane plans to finance $250,000. What's the loan-to-value ratio?

Answer 1

The loan-to-value ratio will be 83.33%, if she plans to get a loan of $250,000 and her appraised property value is $300,000.

Before granting a mortgage, banking institutions and other lenders will evaluate the risk involved by calculating the loan-to-value ratio (LTV). This ratio is helpful in determining the level of risk associated with lending.

In order to determine a property's loan-to-value ratio, just divide the total amount of the loan by the most recent appraised value of the property.

LTV ratio = MA/APV

where:

• MA stands for "Mortgage Amount."

• APV is an abbreviation for appraised property value.

In the mentioned scenario: the appraised value of the property is $300,000, but the loan amount is just $250,000. If this is the case, the loan-to-value ratio will equal 83.33% ($250,000 divided by $300,000).

To learn more about loan-to-value ratio refer to:

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