LTV (Loan-to-Value Ratio)

Category: finance

The financial ratio expressing the total amount of a loan as a percentage of the appraised value of the asset securing it.

LTV is a core risk metric. A lower LTV (e.g., 65%) means the borrower has significant skin in the game (35% equity), lowering the bank's downside risk. If the borrower defaults, the lender can liquidate the property or asset to recoup the outstanding balance easily.

Common Examples

• We structured the commercial real estate package with a 70% LTV, requiring the business owner to bring 30% cash equity to closing.
• If property values collapse regionally, our portfolio’s average LTV increases, triggering strict regulatory provisioning rules.