What is the CLTV ratio?
How is it useful?
The ratio answers vital questions for lenders such as:
- What is the minimum down payment?
- What is the interest rate?
- How much risk does this deal hold?
- What is the loan amount?
- How much skin will the borrower have in the deal?
- How much skin will the lender have in the deal?
- Does the borrower have any other liabilities and debt obligations?
- Can the borrower afford this loan?
How do lenders calculate the CLTV ratio?
CLTV = 79%
CLTV = $790,000 / $1,000,000
Appraised Values = $1,000,000
Property 1 = $450,000
Property 2 = $350,000
Property 3 = $200,000
Total Debt = $790,000
Property 1 = $350,000
Property 2 = $300,000
Property 3 = $120,000
Car 1 = $15,000