What is a loan-to-value ratio (LTV)?

The loan-to-value ratio, or LTV, is the percentage of a property's appraised value that is being financed through a mortgage. It is calculated by dividing the loan amount by the property's value. For example, if you are purchasing a $400,000 home with a $320,000 mortgage, your LTV is 80%. Lenders use LTV as a key measure of risk — the higher the LTV, the less equity the borrower has, and the greater the lender's exposure if the borrower defaults.

Different loan programs have different maximum LTV requirements. Conventional loans often require a maximum LTV of 80% to 97% depending on the program; FHA loans allow higher LTVs with mortgage insurance. In the Western Catskills, where buyers are increasingly purchasing second homes and investment properties alongside primary residences, it's worth knowing that lenders typically require lower LTVs — and thus larger down payments — for second homes and investment properties than for primary residences. This means buyers of vacation homes in Delaware, Ulster, Greene, or Otsego counties may need to put 20–25% or more down depending on the loan product.