What does the term "LTV" stand for in real estate?

The term "LTV" stands for "Loan to Value," which is a significant financial metric in real estate transactions. It is calculated by taking the amount of a mortgage loan and dividing it by the appraised value of the property (or the purchase price, whichever is lower).

This ratio is crucial for lenders as it helps assess the risk of a loan. A higher LTV indicates a higher risk because it suggests the borrower is financing a more substantial portion of the property's value, which could lead to challenges in the event of default. Conversely, a lower LTV typically represents less risk to the lender, as the borrower is contributing more equity upfront.

While terms like "Lease to Value," "Location to Value," and "Land to Value" might seem plausible, they are not standard terminology used in the industry. Hence, they would not accurately represent the established financial concept that LTV embodies.