Combined Loan-To-Value Ratio (CLTV Ratio)

The combined loan-to-value ratio (CLTV ratio) is a measure of the amount of debt a borrower has relative to the value of their home. It is calculated by adding together the principal balance of all mortgages and home equity loans on a property, and then dividing that number by the appraised value of the home.

The CLTV ratio is used by lenders to determine how much risk they are taking on when they make a loan. A higher CLTV ratio means that the borrower has less equity in their home, which makes them more likely to default on their loan. As a result, lenders typically charge higher interest rates on loans with higher CLTV ratios.

The CLTV ratio is also used by mortgage insurers to determine how much they will charge to insure a loan. The higher the CLTV ratio, the more likely the loan is to default, so the more the insurer will charge.

The CLTV ratio is an important factor to consider when you are buying a home. A lower CLTV ratio will make you more attractive to lenders and will result in lower interest rates and mortgage insurance premiums. However, you should also be aware that a lower CLTV ratio means that you will have to put down a larger down payment.

Here are some additional things to keep in mind about the CLTV ratio:

* The CLTV ratio is not the same as the debt-to-income ratio (DTI). The DTI ratio measures your total monthly debt payments, including your mortgage, car payments, student loans, and other debts, as a percentage of your gross income.
* The CLTV ratio is calculated using the appraised value of the home, not the purchase price. This is important to keep in mind if you are buying a home that is in need of repairs or renovations.
* The CLTV ratio can change over time as you make payments on your mortgage and as the value of your home increases or decreases.

If you are concerned about your CLTV ratio, there are a few things you can do to improve it. You can make extra payments on your mortgage, which will reduce the principal balance and lower your CLTV ratio. You can also make improvements to your home, which can increase its value and lower your CLTV ratio.

The CLTV ratio is an important factor to consider when you are buying a home. By understanding how it is calculated and how it can affect your mortgage, you can make informed decisions about how to finance your purchase.