LTV Calculator - Loan to Value
This Loan to Value calculator (or LTV calculator for short) finds the proportion between the loan you need to take and the price of the purchased property. It can also determine the loan amount from the down payment and the LTV.
If you're interested in finances, you can take a look at our partially amortized load calculator. Otherwise, keep reading to learn:
- What is a loan-to-value ratio;
- How to calculate the loan-to-value ratio using the loan-to-value ratio formula; and
- How to use our loan-to-value ratio calculator.
What is a loan to value ratio?
The loan to value (LTV) is the ratio between the loan amount and the total purchase price. The most common context where you can see this notion in action is when you want to buy a property.
Imagine that you want to buy a house. You can't afford it, though, unless you take a mortgage, covered in our mortgage calculator - the property costs $200,000. You have analyzed your finances and decided that you have $20,000 available for the down payment.
Subtract the down payment from the total price to obtain the loan amount:
$200,000 - $20,000 = $180,000
Divide the loan by the total price:
$180,000 / $200,000 = 0.90
Finally, multiply this value by 100% to obtain LTV:
LTV = 0.90 * 100% = 90%
This means that the loan represents 90% of the market value of the property.
How do I calculate the loan to value ratio?
To determine the LTV of a transaction, use the following loan-to-value formulas:
purchase price = down payment + loan
Intuitively, the total purchase price is the sum of the down payment (the sum of money you are able to pay from your account) and the loan that the bank lends to you.
LTV = loan / purchase price × 100%
As mentioned earlier, this LTV calculator defines the Loan to Value ratio as the loan divided by the purchase price, expressed as a percentage.
How to use our loan to value ratio calculator?
You can use the calculator in multiple ways. For example, you can input the LTV and total property price and let this tool figure out the other two values.
Alternatively, you can input the loan amount and the LTV percentage, and our calculator will give you the purchase price and down payment.
How do I calculate the purchase price given loan amount and LTV?
To determine the price, follow these steps:
- Convert the LTV from percentage to decimal. For instance,
80% = 0.8.
- Divide the loan amount by the number from Step 1.
- The result is the purchase price of the property. An online LTV calculator will help you verify your answer.
What is LTV used for?
Banks use the LTV to determine how much they can safely lend you. The lower the LTV, the lower the risk for a bank. Your LTV should not exceed 80%. You must make a bigger down payment or choose a cheaper property to lower it.