Loan-to-value ratio (LTV) is a ratio of the percentage of the appraised value of a property that a lender will loan. The lower the ratio, the higher the equity. An LTV ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Loans with high LTV ratios are higher risk so, if the mortgage is approved, the loan will generally cost the borrower more. Sometimes, a loan with a high LTV ratio may require the borrower to purchase mortgage insurance to offset the risk to the lender.
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