What does Loan-To-Value mean?

Loan-to-Value (LTV) is a financial term that represents the ratio between the amount of a loan and the appraised value or purchase price of the collateral or property being financed. It is commonly used in the mortgage industry to assess the risk of a loan. A lower LTV indicates a lower risk for the lender, as the borrower has more equity in the property. A higher LTV, on the other hand, suggests a higher risk, as the borrower has less equity in the property. LTV is an important factor in determining the terms and conditions of a loan, including the interest rate and the requirement for private mortgage insurance (PMI).