This Loan to Value (LTV) Calculator is a simple yet effective tool designed to help individuals understand their borrowing capacity against the value of their home. It calculates your current LTV percentage and determines the amount you are eligible to borrow based on the current market value of the home, the remaining balance on the mortgage, and the LTV ratio required by the bank.
LTV Calculator Help Guide
- Current Home Value: The market value of the user’s home. You can get an estimate on this amount from Zillow, but an appraisal of your home will be required before a loan is issued.
- Remaining Mortgage Balance: The outstanding amount left to pay on the home’s mortgage.
- Loan To Value Required by Bank: The maximum LTV ratio that a bank will allow for borrowing, expressed as a percentage. Each bank will often have different limits for different loan types and credit profiles. 80% is the most common maximum LTV a bank will allow.
Calculating the Loan to Value (LTV) Percentage
- The LTV percentage is calculated by dividing the Remaining Mortgage Balance by the Current Home Value and then multiplying the result by 100. This percentage reflects the portion of the property’s value that is still owed.
Determining the Amount Eligible to Borrow
- If the calculated LTV is higher than the LTV required by the bank, the Amount Eligible to Borrow is set to zero, indicating that no further borrowing is possible.
- If the calculated LTV is lower than or equal to the bank’s requirement, the Amount Eligible to Borrow is computed. This is calculated as the difference between the product of the Current Home Value and the LTV percentage required by the bank, and the Remaining Mortgage Balance.
- The calculator provides a simple user interface where the user can input the required values and the results, LTV percentage and the Amount Eligible to Borrow, are both displayed immediately.
Loan to Value (LTV) is a financial term used to express the percentage of the value of your home that is mortgaged. If your home is worth $200,000 and your mortgage balance is $200,000 your LTV is 100%. If you owe nothing on your home, your LTV is 0.