In the realm of real estate financing, what does 'LTV' stand for?

In real estate financing, 'LTV' stands for Loan To Value. This critical financial metric is used by lenders to assess the risk of lending. The LTV ratio is calculated by dividing the amount of the loan by the appraised value of the property being purchased or refinanced.

A lower LTV ratio indicates less risk for the lender since it means the borrower is investing more of their own money into the property, while a higher LTV suggests more risk as the borrower is financing a larger portion of the property's value. Typically, lenders prefer borrowers to have a lower LTV ratio, as this can sometimes lead to more favorable loan terms.

Understanding LTV is essential for both borrowers and real estate professionals, as it plays a significant role in determining whether a loan is approved and what terms will apply.