What is the real-estate term for the ratio of a mortgage loan to the property’s appraised value?

The ratio of a mortgage loan to a property’s appraised value is the loan-to-value ratio.

Usually abbreviated LTV, it is calculated by dividing the loan amount by the property’s value and expressing the result as a percentage. A $240,000 mortgage on a property valued at $300,000 has an 80% LTV ratio.

Lenders use LTV to assess collateral risk. A higher LTV generally means the borrower has less equity in the property and may face stricter lending terms or mortgage insurance requirements. The relevant value may be the purchase price, appraised value, or the lower of the two, depending on the lender’s rules.

LTV is different from a cap rate, which measures property income against value, and from a debt-service coverage ratio, which compares income with debt payments.