Dear Hilary – LTV Definitions and Calculations
April 2016

Dear Hilary,

Can you explain the new definitions of Loan to Value to me? I am also trying to validate the LTVs on some of my residential loans in Visible Equity to what I am calculating internally. How does Visible Equity calculate LTV?

Sincerely,
LTV Frustration

 

Dear Confused Client,

Great question, which I’m happy to answer. Previously you might have seen “Loan to Value (Current)”, this has been changed to “LTV (Effective)”. Similarly, where you previously saw “Loan to Value (Original)”, you will now see “LTV Original (Effective)”. The word “Effective” implies that a CLTV is being calculated on loans that are in second position, or if the loan is in first position an LTV is being calculated. Again, the calculations have not changed just the terminology.

We recommend using the LTV (Effective) stratification options 99% of the time, but below you will find the formula for each Loan to Value calculation in Visible Equity:

LTV (Effective)
If 1st position then Balance / Current Value
If 2nd position then (Balance + Senior Balance) / Current Value

LTV Total Commitments (Effective)
If 1st position then (Greater of Balance or Credit limit) / Current Value
If 2nd position then ((Greater of Balance or Credit limit) + (Greater of Senior Balance or Senior Credit limit)) / Current Value

LTV Original (Effective)
If 1st position then Original Balance / Original Value
If 2nd position then (Original Balance + Original Senior Balance) / Original Value

LTV Original Total Commitments (Effective)
If 1st position then (Greater of Original Balance or Original Credit limit) / Original Value
If 2nd position then ((Greater of Original Balance or Original Credit limit) + (Greater of Original Senior Balance or Original Senior Credit limit)) / Original Value

Have a wonderful weekend!

Hilary

Related Blog Posts
Further Your Education