What Is Loan-To-Value (LTV)?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Loan-to-Value (LTV) is a financial metric used to evaluate the level of risk given the possibility of default on a loan. The value asset is typically used as collateral for the loan, so if the value of the loan is much higher than the value of the asset, the lender is unlikely to get all their money back in the event of a default.

The calculation for LTV is simply:

  • Value of Loan / Value of Asset

The LTV of home mortgages is usually between 70-80%, meaning prospective homeowners need to provide 20-30% of the value of the house themselves before being considered for a mortgage.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.