Glossary
Loan-to-value ratio
The loan amount divided by the property's value, expressed as a percentage — a core number in mortgage and home-equity underwriting.
LTV compares what you're borrowing to what the collateral is worth: an $240,000 loan on a $300,000 home is 80% LTV. Lower LTV means more equity cushion for the lender, which is why it drives pricing and mortgage-insurance requirements — cross above 80% LTV on a conventional loan and PMI kicks in. On home equity products, lenders talk about combined LTV (CLTV), which adds your first mortgage and any new borrowing together against the home's value, typically capped at 80–85%.
Related terms
- Unsecured A loan that requires no collateral — approval rests on your credit profile and income.
- Origination fee An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
- Prepayment penalty A fee some lenders charge for paying a loan off early. Rare on consumer loans, common in commercial lending — always check the note.
- Secured credit card A credit card backed by a cash deposit you make upfront — the deposit becomes your credit limit, and it is the standard tool for rebuilding credit.
- Promissory note The legal document where you promise to repay a loan under specific terms — amount, rate, schedule, and what happens on default.
- APR Annual percentage rate — the interest rate plus mandatory fees, expressed as one yearly cost. The only honest way to compare two loan offers.