Advantage Software LLC            Real Estate Investment Analysis Software
                              Loan-to-Value Ratio / LTV Ratio
 
 
 
  Home   Order Software   Software Description   Sample Reports   Sample Graphs    FAQ    Advanced Topics  
 
  Advanced Topics  
  Capitalization Rate   
  Capital Gains Rates  
  Cash on Cash Return  
  Debt Coverage Ratio  
  Deducting Rental Losses  
  Depreciation  
  Discounted Cash Flows  
  Bank Foreclosures  
  Tax Foreclosures  
  Gross Rent Multiplier  
  Income Approach  
  Internal Rate of Return  
  Loan-to-Value Ratio  
  Modified IRR  
  Net Income Multiplier  
  Net Operating Income  
  Operating Expenses  
  Operating Expense Ratio  
  Real Estate Leverage  
  Loan Points  
  Pyramiding  
  Beyond Rich Dad  
  Real Estate Appreciation  
  Return on Investment  
  Tax Brackets  
  Tax Deductions  
  Website Search  
  Contact Us  
     
        
     
            
 
      Loan-to-Value Ratio or  LTV
 
 
  The loan-to-value ratio or LTV ratio is calculated by dividing the loan balance of a property by the market value and is expressed as a percentage.  For example, a property with a loan balance of $400,000 and a market value of $500,000 has a Loan-to-Value Ratio of 80%.   
 
 
                                                  Balance of Loans                           $400,000     
                      LTV Ratio   =    -----------------------    X    100    =     -------------    X    100   =    80%
                                                     Market Value                              $500,000
 
 
  The Loan-to-Value Ratio can be used to estimate the amount of equity you have in a property.  If the LTV ratio for a property is 75%, your equity position in a property is 100 minus 75 or 25%.  You can then multiply .25 times the market value to determine the equity  amount.  
 
               
 
  Lenders may require mortgage insurance on loans with a loan-to-value ratio greater than a predetermined amount, usually 80%.  This means that the purchaser of a property will need to put a minimum of 20% down to avoid paying mortgage insurance premiums.  Mortgage insurance is a premium amount which is added to the monthly mortgage payment.  The purpose of mortgage insurance is to protect the lender if the buyer defaults.

The Loan-to-Value Ratio is also used when an investor wishes to refinance a property.  For example, you have owned an investment property for a number of years and you would like to refinance the property to take cash out.  Most lenders will allow a maximum of 75% the appraised value or a 75% LTV ratio for the new loan amount.  Lenders who refinance at loan-to-value ratios greater than 75% will usually charge less favorable interest rates.

The lower the loan-to-value ratio, the greater the property owner's equity and the less likely they are to default on the loan.  A lower loan to value ratio translates into less risk for the lender.

The loan-to-value ratio is just one of many important real estate ratios calculated by the On Target real estate investment software.  On Target provides extensive income property analysis and can help you quickly size-up an income property.  An Executive Summary is provided which includes all of the most important information from other On Target reports so that you can quickly compare multiple income properties.  Just run the data for each income property you are analyzing, print the executive summary for each property, and compare the returns to see which property generates the greatest return.  If you are interested in purchasing On Target for just $97.95, click on   Purchase Software   To learn more about this powerful analysis tool, check it out here.  Software Features    The On Target real estate investment software includes a 30 day money back guarantee and free support.

                               (c) Copyright 2000 - 2010 Advantage Software LLC