B. Loan-to-Value Ratio (LTV)

The loan-to-value ratio (LTV) compares the ratio of how much money is borrowed to how much a property is worth. Banks use this number to decide how risky a loan is. Imagine a home is worth $1,000,000. If you borrow $800,000, the LTV is 80%. If you borrow $950,000, the LTV is 95%Why LTV matters? A low LTV means the bank is safer, as you paid more money yourself. A high LTV means more risk for the bank, as you borrowed almost all the value of the home. If someone stops paying the loan, the bank has less protection when the LTV is high.