Loan
To Value
One
term you will generally be hearing a lot during your quest for a mortgage
will be loan
to value, or simply put, LTV.
Loan
to value is the amount of the loan you want, divided by the value of your
home.
Lets
suppose you want to refinance your home in order to get a lower interest
rate.
The
amount you owe on your current mortgage is $125,000.00, and the appraised
value of your home is an estimated $155,000.00.
$125,000.00
divided by $155,000.00 equals 81%. Your loan
to value would be 81%
The
lower the loan to value on your home, the better off you are, because
for starters, you have built a lot of equity
in your home which can be drawn upon with a home
equity loan, and if not, you are working towards a nice nest egg for
your retirement.
A
low loan to value plays a determining factor in your interest
rate as well. From a lenders
point of view, the lower the LTV, the less risk for them, and they generally
will reward you with a lower
rate.
In
order to have the value
of your home determined and recorded, you would need to have an appraiser
come out and evaluate it. Your lender normally will handle setting this
up, however, most appraisers require payment
at your doorstep. Look for our articles on Appraisals
for more information.
Debt
To Income Ratio
Doing
Your Mortgage Homework
Home
Appraisal
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