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Loan to Value (usually expressed as a percentage): Refers to the principle loan amount divided by the value of a property or other asset. Example; Principle loan amount = $80,000.00 divided by Property value = $100,000.00 has a 80% loan to value (also called LTV). The valuation of property is typically determined by an appraiser, but there is no greater measure of the actual real value of any one property than an arms length transaction between a willing buyer and a willing seller. Typically, banks will utilize the lesser of the appraised value and purchase price if the purchase is "recent". What constitutes recent varies by institution but is generally between 1-2 years. When dealing with multiple loans for one subject property Combined Loan to Value (called CLTV) becomes another factor. Junior liens are measured by CLTV. Example; a property valued at $100,000.00 has a 1st mortgage loan for $80,000.00 as well as a 2nd mortgage for $10,000.00 ($90,000 combined loan amounts). The 2nd mortgage has a 90% CLTV but only a 10% LTV. The CLTV is the number that will be utilized during underwriting.
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