A loan to value (LTV) ratio is the percentage of an asset's purchase price that is financed through a loan. The higher the LTV, the more risk there is in terms of making your monthly payments on time.

People with low ratio value mortgages have home loans equal to 80% - 90% of their property's value, which means they have a comparatively lower risk for foreclosure and repossession if they can't make their monthly mortgage payments. They also qualify for better interest rates when obtaining a mortgage. Low-ratio mortgages are available for those who want to refinance or buy another home without having to put down more money or use up any savings or other assets they may have saved up over time.

In Canada, the maximum amount you can borrow with a low-ratio mortgage is $750,000 (or 80% of the home's value). You can also use a low-ratio mortgage to refinance up to 100% of your home's value.

People who have high-ratio mortgages finance more than 75% of their property's value. If they cannot make their monthly payments, they are at an increased risk for foreclosure and repossession; however, if they do meet their monthly financial obligations on time, their monthly payments are usually lower than those with low-ratio mortgages because of the amount financed.

A high-ratio mortgage is available for those who do not qualify for a low-ratio value mortgage or who have little or no equity in their homes.

You can calculate your current LTV ratio based on information from your last tax assessment, a copy of your last home insurance statement, and any recent appraisal of the property you are purchasing. You might also be able to find this information online by looking up your property on provincial land registry websites. The LTV ratio is an important factor when making the decision to refinance or buy another home because it is directly linked to the amount of risk you are willing to take on as a borrower.

Here are some commonly used formulas for calculating your LTV ratio

Maximum LTV Ratio 80% or 100% of total property's value. The maximum LTV ratio is 80 percent for Standard Canadian Mortgages (SCCM). This financing is available to individuals as well as corporations from most lenders and mortgage companies. In Canada, the maximum LTV ratio is restricted to 80 percent for owner-occupied homes.

80% or 100% of total property's value. The maximum LTV ratio is 80 percent for Standard Canadian Mortgages (SCCM). This financing is available to individuals as well as corporations from most lenders and mortgage companies. In Canada, the maximum LTV ratio is restricted to 80 percent for owner-occupied homes. Down payment The greater the down payment, the smaller your monthly payments and the lower your interest rate will be. But for some buyers, this may mean they can't purchase as much home as they would like due to not having enough money saved up for a down payment.

The greater the down payment, the smaller your monthly payments and the lower your interest rate will be. But for some buyers, this may mean they can't purchase as much home as they would like due to not having enough money saved up for a down payment. Higher LTV ratio = lower monthly payments Lower LTV ratio = larger monthly payments

Why is the LTV ratio one of the top metrics every investor should know?

Loan-to-value (LTV) ratio is one of the top metrics to track. It's important because it directly reflects the financial position of a company. Oftentimes, the current LTV ratio is compared to its historical numbers in order to see how it has changed over time. Changes in the total amount of debt might indicate economic difficulties that could lead to default or bankruptcy.

For example, mortgage companies tend to have variable interest rates based on current market conditions. LTV ratio is a common factor that determines how much interest rate they can charge for a loan. When the value of the homeowner's property declines, so does their LTV ratio. This could lead to a decrease in the mortgage rate, which in turn can make it easier for you to qualify for a mortgage loan or refinance your mortgage.

As long as your LTV ratio is still within acceptable limits and you're within your amortization period, you might be able to enjoy up to 20% in savings when refinancing or buying another home because your new lender will look at the equity available in your home on top of the amount you want to borrow when setting up new terms for your loan.

For more information, you can visit Real Estate Calculators.