What is Loan-to-value (LTV) in Asset-Backed Securities?

Q: What is Loan-to-value (LTV) in Asset-Backed Securities?

Loan amount divided by property value. Loan-to-value simply asks: how big is the loan compared to what the thing it's buying is actually worth? If you borrow $80,000 to buy a $100,000 house, your LTV is 80%. A lower LTV means the borrower has more of their own money on the line, so the lender is safer, because even if the property loses some value or has to be sold in a hurry, there's a cushion before the lender starts losing money. High LTV is riskier: borrow $98,000 on that same house and a small dip in prices leaves the lender underwater.

Loan-to-value (LTV)

Asset-Backed Securities glossary · Collateral & Cash Flow Modeling

Definition

Loan amount divided by property value.

Loan-to-value (LTV) in plain English

Loan-to-value simply asks: how big is the loan compared to what the thing it's buying is actually worth? If you borrow $80,000 to buy a $100,000 house, your LTV is 80%. A lower LTV means the borrower has more of their own money on the line, so the lender is safer, because even if the property loses some value or has to be sold in a hurry, there's a cushion before the lender starts losing money. High LTV is riskier: borrow $98,000 on that same house and a small dip in prices leaves the lender underwater.

Also called: LTV

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Practice Loan-to-value (LTV)

Based on standard CMBS underwriting, which of the following correctly identifies the Loan-to-Value (LTV) ratio and its…

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