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Real Estate and Mortgage Institute of Canada Inc.
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2175 Sheppard Ave E, Suite 307
Mississauga: 1065 Canadian Pl, Suite 203
t: 1-877-447-3642     e: support@remic.ca

What is loan to value (ltv)?

The ltv is the amount of the loan, in dollars, in relation to the value of the property, in dollars, expressed as a percentage that is typically rounded off to two decimal places (unless it is an exact number).  For example, if the ltv is exactly 90% there is no need to show any decimal places.  Lenders use this ratio to determine the maximum loan amount for a given property based on the specific type of loan product that is offered by the lender.

There are two calculations when using the ltv.  The first is calculating the ltv of a mortgage.  To accomplish this we divide the amount of the loan by the value of the property.  For example, if we had a $200,000 mortgage and a $400,000 house, the equation would look like this:

$200,000 / $400,000


Mortgage brokering in Ontario is regulated by the Financial Services Commission of Ontario (FSCO) and requires a license.  To obtain a license you must first pass an accredited course.  The Real Estate and Mortgage Institute of Canada Inc. (REMIC) is accredited by FSCO to provide the course.  For more information please visit us at www.remic.ca/getlicensed or call us at 877-447-3642.


calculating a loan to valueThe second use for the loan to value is to determine a maximum mortgage amount.  To accomplish this we multiply the loan to value by the value of the house.  For example, if we have a loan to value of 90% and a $400,000 house, the equation would look like this:

90% x $400,000

To better illustrate these calculations let’s look at a few examples.

Example 1 – calculating the loan to value

A client would like a 1st mortgage in the amount of $270,000.  The property he is purchasing is valued at $300,000.  What is the LTV of the proposed 1st mortgage?

Solution

LTV = (Proposed 1st mortgage amount / Property value) x 100

LTV = (270,000 / 300,000) x 100

LTV = .90 x 100

LTV = 90%

Therefore, the loan to value of the proposed 1st mortgage is 90%.

Pause for clarification – Converting decimals to percentages

When you calculate a percentage the decimal number must be multiplied by 100 to obtain the percentage.  For example, 10 is 10% of 100.  We can calculate this by dividing 10 by 100 (10/100).  That, however, equals 0.10.  The answer is not 0.10 percent.  To convert the decimal to its percentage you must multiply it by 100.  Therefore, 0.10 multiplied by 100 equals 10.  This (10) is the percentage.

Example 2 – calculating the loan to value

A client would like to refinance her 1st mortgage in the amount of $185,000.  She has told you that her home is worth $222,000.  What is the ltv of this proposed mortgage?

Solution

LTV = (Proposed 1st mortgage amount / Property value) x 100

LTV = (185,000 / 222,000) x 100

LTV = (8.33333333E-1) x 100

LTV = .833333333 x 100

LTV = 83.33%

Therefore the loan to value of the proposed 1st mortgage is 83.33%.

Joe White
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Joe White

President at REMIC
Joseph J. White has been involved in the mortgage industry since 1988. He began his career as a mortgage agent, and in the mortgage lending sector of the industry he has held positions as National Sales Manager and VP of Sales with two national mortgage lenders.

In the industry’s mortgage brokering sector he is a licensed mortgage broker and has been a partner at a successful mortgage brokerage, manager at two national brokerages, principal broker at a commercial brokerage, founder of a mortgage investment corporation, and is owner and principal broker of his own boutique brokerage.

As an educator, Mr. White has been educating the mortgage industry since 1996.During his 14 years at Seneca College he was a professor and program coordinator and is currently President of the Real Estate and Mortgage Institute of Canada Inc. (REMIC).Mr. White has developed several courses for Seneca College, including the first mortgage broker education program in Ontario,as well as the mortgage agent course.He has written two textbooks used in the mortgage industry and by over 20 Ontario colleges with over twenty thousand copies in print, in addition to several business focused books and e-books. He has instructed over fifteen thousand students and in 2003 won the Excellence Award for teaching and leadership excellence at Seneca College.He can be contacted at joe.white@remic.ca
Joe White
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