LTV calculations<\/a><\/u> have a lot to do with the down payment you make for your mortgage loan.\u00a0<\/p>The ratio is almost the complete opposite of the down payment as it is equal to the balance of the mortgage divided by the total value of the property.\u00a0<\/p>
For a better understanding let us consider an example of a home valued at $200,000.\u00a0<\/p>
A down payment of 20% brings the balance to $160,000. Dividing this amount ($160,000) by the value of the home ($200,000), we get the LTV ratio equal to 80%.\u00a0<\/p>
Which, in simple words, is the part of the property value that is not covered by the down payment of 20%.<\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Value of the property: $200,000<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Balance mortgage: $160,000<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0LTV Ratio: 80%<\/b><\/p>
The combined loan to value ratio is calculated similarly.\u00a0<\/p>
For calculating the CLTV you have to add the loan amount of the first mortgage to the outstanding amounts of other mortgages, home equity lines of credit, and home equity loans.\u00a0<\/p>
CLTV considers the amount that you draw on the line of credit for a home equity line of credit or HELOCs.\u00a0<\/p>
After adding these numbers, the total amount is then divided by either the appraised value of the property or the sales price, whichever is the lower value.\u00a0 \u00a0<\/p>
Let us consider an example. The value of the property is $200,000, and we have two mortgages, one of $80,000 and another of $75,000.\u00a0<\/p>
Along with the two mortgages we have used a HELOC to draw $10,000 and the same property is used as collateral for all of these. Thus, the total outstanding balance after adding them all comes out to be $165,000. Diving this amount by the value of the property i.e., $200,000, we get the CLTV as 82.5%.<\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Balance of the first mortgage: $80,000<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Balance of the second mortgage: $75,000<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Drawn from HELOC: $10,000<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Total: $165,000<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Home appraised value or sales price: $200,000 (Lesser value)<\/b><\/p>
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0CLTV Ratio: 82.5%<\/b><\/p>
If after you have purchased a home, the appraised value of it goes down, this lower value will be considered for the calculation of your CLTV. However, this will only make a difference if you refinance your mortgage.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t