What is the loan for value?
The term of the loan to value or LTV applies primarily to the mortgage banking industry. It is a equation that mortgage lenders use to assess their risk in lending the debtor's money to buy a real estate. The equation is basically the ratio of the amount of borrowed money to the value or purchase price of the property, depending on what is smaller. To determine the LTV new purchase, the purchase price or the evaluated value is divided by a deposit. As an example, if you buy a $ 100,000 house in the US (USD) and have $ 10,000 USD to log in as a deposit, the loan for value would be 90%.
The purpose of introducing a ratio for a loan for the value when buying a house is to protect the loan from lending more money than the property is worth it. Therefore, the estimated value must be at least equal to the purchase price. For consumers, the ratio weighs the heavy interest rate you receive for the return of the loan. The lower the LTV, the lower the interest rate. Generally, for every 5% of the loan increase to a value above 70%, the interest rate increases by 1/8 percent.
In addition, most creditors require private mortgage premiums or PMI with a ratio of more than 80%. The private mortgage bonuses will depend on the insurance company and the creditor, but can be up to 1% of the loan amount.
Although the debtor pays a higher interest rate for 100% loan to value, many creditors will offer this level of loan for a new purchase. However, the refinance loan generally does not be 100%. The creditors determine the ratio of refinancing by requiring the assessment of the property. They can usually check selling prices of comparable properties up to 1 kilometer (1.6 km) to determine the value of the house, but in special circumstances it may be necessary to pass through the evaluation.
The ratio of the loan to the value of the valuability also determines that the amount that the creditor provides to the debtor who wishes to obtain the loan line of the home capital or the second mortgage. The difference between the value of the house and the amount owed to the primaryThe mortgage is the maximum amount that can be borrowed.