have equity value in your home
LTV stands for: loan-to-value
Banks and other lenders will extend credit based upon a percentage of the estimated market value of your home.
That percentage of market value minus the amount you owe on your first mortgage (plus any 2nd or 3rd mortgages that you may have) becomes the maximum amount of credit that lenders will give you.
For Example:
Let's say that your home has an estimated market value of $250,000. The amount that you still owe on your first mortgage and any other liens is $100,000. The maximum amount you can borrow is calculated as follows:
| Estimated Market Value: | $250,000 | $250,000 |
| Percentage LTV: | 70% | 80% |
| Percentage of Market Value: | $175,000 | $200,000 |
| Less Mortgage Debt: | $100,000 | $100,000 |
| Equals Total Equity: | $75,000 | $100,000 |
| Estimated Market Value: | $150,000 | $150,000 |
| Percentage LTV: | 90% | 100% |
| Percentage of Market Value: | $135,000 | $150,000 |
| Less Mortgage Debt: | $100,000 | $100,000 |
| Equals Total Equity: | $35,000 | $50,000 |
Best Rates at 80%LTV
Lenders generally charge a higher rate of interest for higher percentages of LTV. That is why you will find in the market quoted rates of PRIME + 0% for LTV percentages of 80% or lower.
To get the best rate, keep your loan request at 80%LTV or lower.
