Lánshlutfall

Lánshlutfall, also known as loan-to-value ratio (LTV), is a financial metric that expresses the proportion of a property's purchase price or appraised value that is financed with a loan. It is calculated by dividing the loan amount by the appraised value or purchase price and multiplying by 100 to obtain a percentage. For example, if a borrower borrows 240,000 on a property valued at 320,000, the lánshlutfall is 75%.

Lánshlutfall is used by lenders to assess risk and determine loan eligibility, down payment requirements, and interest rates. A higher LTV generally indicates greater risk for the lender and can lead to higher interest rates, mandatory mortgage insurance, or stricter terms. Lower LTVs are viewed as less risky and typically yield more favorable terms for borrowers.

Typical ranges vary by market, but mortgage LTVs commonly fall between 60% and 80%. Higher LTV loans of 90% or more may be possible with mortgage insurance, guarantors, or stricter underwriting, depending on local regulations and lender policies.

Limitations: LTV is a snapshot at loan origination based on the value used at that time. It does not account for changes in property value, other debts of the borrower, or potential shifts in interest rates. It also depends on whether the value used is the purchase price or an appraisal, which can differ.

In practice, LTV is a central concept in housing finance and risk management, influencing both borrower costs and lender exposure. See also mortgage, down payment, collateral, mortgage insurance.