Max 75% LTV Purchase or Refinance – Mixed Use
75 Percent Maximum LTV: What Does it Signify?
One of the deciding factors for mortgage approval is the Loan-to-Value (LTV) ratio. This is a ratio of the loan amount to the purchase or appraised value of your property.
This ratio is one of the loan characteristics used to assess your risk as a borrower interested in a purchase or refinancing. The maximum LTV in this case is 75 percent.
Here is an illustration to help you understand this aspect better. Let us use two fictional potential borrowers, Tom and John.
Tom’s CaseTom owes $100,000 on a $200,000 property and wishes to refinance this mortgage.
Tom’s LTV ratio = $100,000/$200,000 = 0.5 or 50 percent
This means Tom can free up 50 percent equity on the property.
John’s CaseJohn wants to buy a property valued at $250,000. He has $20,000 down payment.
Loan value = $250,000 – $20,000 =230,000
John’s LTV ratio = $230,000/$250,000 = .92, or 92 percent
This means John’s risk as a borrower is high.
What Does this Mean?Both cases are valid, but the ramifications are different. The maximum LTV ratio represents the point where you begin paying mortgage interest on the loan.
In the illustration above, a lender will easily consider Tom’s loan application, but hesitate when it comes to John. John will have to pay mortgage insurance because he is considered a high-risk borrower.
What Should You Do?The answer to this is simple: consult us. We are a reputable loan company that helps you tackle various issues with your loan. We work with lenders to make sure you get lending services tailored to your needs. Is your LTV too high? Let us tell you what to do to get the loan you need at reasonable rates.