Loan to Value, definition of

LOAN TO VALUE

The Loan-to-Value Ratio is used by lenders to determine the worthiness of the project. The loan or mortgage is divided by the fair market value of the property. All lenders set a point beyond which they refuse to go. Banks are notorious for setting extremely low loan to value ratios. For example, if the property is worth $1,000,000 and the loan is $500,000, the Loan-to-Value ratio would be 50%. The LVR helps one quickly determine how leveraged a property is.

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