A bad loan-to-value ratio would be any amount over 100%. This means you are "underwater" on your mortgage, or you owe more on your home than it's worth. This makes it much more complicated to refinance or sell your house.
In general, anything under 80% is considered to be a good LTV. Over 80% is considered to be a higher LTV, and whilst there are still mortgages available for 80%, 85%, 90% and even 95% LTVs, you'll have a smaller pool to choose from, and you may have to pay more in the long run.
A good LTV could be anywhere from 40% to 75%. Generally, the lower the LTV the more likely you are to access better mortgage rates.
In general, a good LTV hovers around 80% or less. At this range, lenders may be more willing to offer you a conventional home loan and at more competitive rates.
As you're putting down such a large deposit, you'll own more of the property at the start of the mortgage. This means banks and building societies regard 50% LTV mortgages as lower risk and tend to offer more attractive interest rates, so you should get a good deal.
Key takeaways
The current average personal loan interest rate is 12.48%. Excellent credit results in the lowest rates — and poor credit may have rates over 30%. Other aspects of your finances, like DTI and income, affect the rate you're offered.
< 80% As a rule of thumb, a good loan-to-value ratio should be no greater than 80%. Anything above 80% is considered to be a high LTV, which means that borrowers may face higher borrowing costs, require private mortgage insurance, or be denied a loan. LTVs above 95% are often considered unacceptable.
Most lenders consider anything under 80% to be a good LTV ratio but will vary by lender. While it's sometimes possible to borrow extra, anything above 80% tends to cost more.
Your debt-to-income (DTI) ratio is how much money you earn versus what you spend. It's calculated by dividing your monthly debts by your gross monthly income. Generally, it's a good idea to keep your DTI ratio below 43%, though 35% or less is considered “good.”
100% LTV mortgages are considered relatively risky, and so are first-time buyers. For this reason, it's an absolute necessity that you have a guarantor if you are to apply for a no deposit mortgage. And even then, it's highly unlikely that your situation will allow you to secure such a mortgage.
Assuming there are no risk factors for the lender to take on board, you should be able to access the best mortgage rates with an LTV of 40% (or 60% deposit). Below you will find examples of some of the current rates for borrowers with this LTV.
What is a good LTV ratio? Different mortgage lenders will have different criteria for LTV ratios, but most prefer a ratio of 80% or below. Mortgages with higher LTV ratios pose a greater financial risk to a lender.
So, before you plan on buying your property, you should first try and save at least 20% of the purchase price - this will mean that your LVR doesn't tip over 80%. If your deposit is less than 20% and your LVR does tip over 80%, your lender takes on more risk.
If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 90 percent, then the borrower must make: a minimum down payment of $10,000 plus closing costs.
Your LTV ratio drops with every mortgage payment. If you make even one extra payment each year, you'll lower your LTV ratio faster. Pick a shorter-term loan. If your budget can handle a higher monthly payment, a 15-year fixed-rate mortgage will lower your LTV ratio more quickly than a 30-year loan.
Lenders generally consider higher LTVs to be riskier because their potential loss would be greater. Consequently, lenders often mitigate their risk by charging higher interest rates on your mortgage loan, and vice versa—a lower LTV could lead to a more favorable mortgage rate.
A good benchmark for LTV to CAC ratio is 3:1 or better. Generally, 4:1 or higher indicates a great business model. If your ratio is 5:1 or higher, you could be growing faster and are likely under-investing in marketing.
What is a good loan-to-value ratio? An excellent loan-to-value ratio is 60% or less. Reaching that point opens up the best mortgage rates from lenders. And deals don't tend to improve beyond that point, whether you achieve an LTV of 40% or even 20%.
The act dictates that your mortgage lender or servicer must automatically terminate PMI when your LTV ratio drops to 78 percent — in other words, when your mortgage balance reaches 78 percent of your house's purchase price.
Multiply that by 100 to determine the percentage, 90 percent. Over time, your LTV should go down as you pay on the loan and/or the asset's appraised value rises—as is often the case with houses. When an LTV ratio is greater than 100 percent, the buyer is considered “underwater” on the loan.
Even people with good credit scores make mistakes, and a bank may charge a penalty APR on your credit card without placing a negative mark on your credit report. Penalty APRs typically increase credit card interest rates significantly due to a late, returned or missed payment.