Example
Imagine buying a home in 2015 for $300,000 with a $240,000 loan (an 80% LTV). By 2023, after paying down $30,000 and seeing the home’s value rise to $350,000, your LTV drops to about 60%. This shift not only gives you more equity but also better financial flexibility.
LTV also plays a part in mortgage-backed securities (MBS). Investors consider the average LTV of the loans in these bundles to assess risk. Lower average LTVs make the securities more attractive, as they’re tied to less risky loans.
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