How to Compute the Loan-To-Value Ratio of Your Property

The computation of loan-to-value ratios is important to banking and finance organizations. Banks rarely lend money that's equal to the amount needed by borrowers to buy real property or construct a house. Most financial institution prefer to give an amount that's equal to or less than 80% of the property's actual value, which is the agreed selling price between buyer and seller, or the recent market value of the property. Even when the loan is way below the required percentage, lenders prefer to use the lowest value between the property value and the purchase price when calculating home loan ratios.