Understanding Loan-to-Value

When working with lenders, there are a lot of terms and abbreviations that you may not be familiar with. In today's blog, your mortgage lender at the Lake of the Ozarks discusses the Loan-to-Value ratio and why it's an important number. Keep reading to learn how your LTV could affect your mortgage or home refinance at the Lake of the Ozarks.

What is Loan-to-Value? 

Loan-to-Value, or LTV, is a ratio of your mortgage loan balance to the value of your home. It is used to estimate how much you owe on your home compared to your home's market value. To determine your LTV, your Lake of the Ozarks mortgage lender will divide your loan amount by the lesser of the home’s appraised value or purchase price. As an example, if you have a $280,000 mortgage loan balance and a home value of $350,000, your LTV would be 80%.

Why is Your LTV Important? 

When it comes to the mortgage approval process, your LTV is a key factor. Mortgage lenders use this ratio on both new purchases and refinance transactions. It is a risk assessment tool that lenders can use to determine if you are eligible to receive a loan. With a higher LTV, lenders perceive that there is a higher risk of the loan going into default because there is little to no equity built up in the property. In the event of a foreclosure, the lender may find it difficult to sell the home for a price sufficient to cover the outstanding loan balance. Not only can a high LTV risk your chances for approval, but if you do get approved, you could be charged a higher rate. In addition to the higher interest rate, you may also be required to purchase private mortgage insurance. In general, most lenders will offer the best interest rates to those borrowers with an LTV of 80% or below.

If you have more questions about your LTV or how it could affect your Lake of the Ozarks mortgage loan or refinance, call 573-746-7211. When it comes to your home financing needs, I'm here to work with you every step of the way. I'll discuss your options, offer competitive rates and back it up with the first class service you deserve!

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct:  (573) 746-7211

Cell: (573) 216-7258

Fax:(866) 397-0318

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.