The loan-to-value ratio (LTV) for a mortgage is the ratio of the loan amount to the value of the home, expressed as a percentage. For example, a home being purchased for $500,000 with a $400,000 mortgage has an LTV of $400,000/$500,000 = 80%. Said another way, the borrower has 20% equity in the property.
LTV is used often by lenders to assess the risk of offering a particular home loan. A borrower with an 80% LTV is less risky than one with a 90% LTV, and the bank will offer more attractive loan terms to the borrower with a lower LTV. The value of the home is determined via an appraisal.