What is a loan-to-value ratio on a mortgage?


Quick Answer

The loan-to-value ratio on a mortgage is a comparison of the total mortgage amount to the value of the property, according to Investopedia. If a loan is for $180,000, and the property's assessed value is $200,000, the loan-to-value ratio is 90 percent.

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Full Answer

Relatively high loan-to-value mortgage ratios are perceived as higher risk by lenders, according to Investopedia. This perspective is based on the limited financial investment on the part of the borrower. Some banks require a ratio of 75 percent or less before approving a mortgage as of 2015, reports Investopedia. People can often get a loan with a higher ratio by paying for mortgage insurance.

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