What is Loan-to-Value Ratio (LTV)?
Loan-to-Value ratio measures the relationship between the loan amount and the value of the underlying collateral. An LTV of 80% means the borrower owes 80% of the property value and has 20% equity. LTV is one of the three primary credit metrics (along with FICO and DTI) used in underwriting and portfolio analysis. Higher LTV means less equity cushion, higher loss severity if the borrower defaults, and greater sensitivity to property value declines. Combined LTV (CLTV) includes all liens against the property.
Formula
LTV = Loan Balance / Appraised Value CLTV = (All Liens) / Appraised Value Current LTV may differ from original LTV due to amortization and property value changes
How LoanBook Uses Loan-to-Value Ratio
LoanBook uses original_ltv as a standard field and applies it in the Prepay Model (higher LTV = lower prepayment due to less equity), the Default Model (higher LTV = higher default risk), and the Severity Model (higher LTV = higher loss given default). LTV stratification uses standard buckets: <50%, 50-60%, 60-70%, 70-80%, 80-90%, 90-100%, 100-110%, >110%.
Frequently Asked Questions
What is the difference between LTV and CLTV?
LTV considers only the subject loan. CLTV includes all liens, first mortgage plus any second lien, HELOC, or other encumbrances. CLTV is always equal to or higher than LTV.
Related Terms
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