what is LTV on loans

In the last year, Banks have been trying with small but steady steps to reopen the mortgage market , offering even very low interest rates & several new privileges, even the possibility of a fixed interest rate for the entire duration of the loan.

So one could say that it is a very good opportunity to buy the... home of your dreams.

However, since the times when banks financed 100% of the purchase of a property have irretrievably passed, in order to acquire the house you want today you should have a respectable amount set aside as bank financing is up to 80% of the commercial value of the property.

More detail

An important element in the process of granting a mortgage loan is the ratio of the amount of the loan to the value of the property or Loan to Value ratio (LTV). This is an indicator used internationally by the banking system and essentially shows how "covered" the Bank is for the loan it gives.

What interests you who want to get a mortgage is that the LTV determines the percentage of the commercial value of the property that is financed by the Bank, that is, the money that the Bank will give you to buy the house. By extension, it also determines the part of the market that must be covered with equity, i.e. from your savings.

Today, you can only get a mortgage if you have the ability to allocate 20%-30% of the value of the house from your savings. Provided, of course, that the loan installment does not exceed 40% of your income and you meet the other criteria set by the banks (not to be in Teiresias, etc.).

For example, if you need to spend €200,000 for the house you have... you should put at least €40,000 out of your own pocket, since this is the only way the Bank will consider granting you a mortgage.

In the past and before the crisis of the last decade, Banks used to finance the entire commercial value, i.e. the value stated in the purchase contract.

In the example of €200,000, they granted a mortgage for €160,000 and the remaining €40,000 was covered through a "repair" and/or consumer loan . So you could buy the house of your dreams without theoretically spending even €1 from your savings at the time of the transaction.

💡 The larger the amount you commit to spending from your own money to buy the house, the more favorable the terms of the loan may be because the Bank assumes less risk and treats you with greater reliability.