 TITLE: Understanding Loan-to-Value Ratio (LTV) CONTENT: How to Calculate LTV\n--------------------\nTo determine your LTV ratio, divide the loan amount by the value of the asset, and then multiply by 100 to get a percentage:\nLTV = (Amount owed on the loan ÷ Appraised value of asset) × 100\nIf you're buying a house appraised at $300,000 and your loan amount is $250,000, your LTV ratio at the time of purchase is: ($250,000\/$300,000) x 100, which equals 83.3%.\nIn other words, the LTV ratio is the portion of the property's appraised value that isn't covered by your down payment. If you put 15% down on a loan that covers the rest of the purchase price, then the LTV is 85%.\nLenders and federal housing regulators are most concerned with LTV ratio at the time the loan is issued, but you can calculate LTV at any time during the loan's repayment period by dividing the amount owed on the loan by the property's appraised value. As you repay the loan, the amount owed decreases, which tends to lower LTV. If the value of your property increases over time, that also reduces LTV. But if the property's value drops (if housing prices fall significantly in the local market, for instance), that can push LTV higher.\nWhen an LTV ratio is greater than 100%, a borrower is considered \"underwater\" on the loan—that is, when the market value of the property is less than the balance owed on the loan. LTVs greater than 100% are also possible early in the repayment period, on loans with high closing costs. END