# Combined Loan to Value Ratio (CLTV)

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Written By
Dan Buckley
Dan Buckley is an US-based trader, consultant, and part-time writer with a background in macroeconomics and mathematical finance. He trades and writes about a variety of asset classes, including equities, fixed income, commodities, currencies, and interest rates. As a writer, his goal is to explain trading and finance concepts in levels of detail that could appeal to a range of audiences, from novice traders to those with more experienced backgrounds.
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## What Is Combined Loan to Value Ratio?

Combined loan to value ratio (CLTV) is the ratio of all loans against a property to the property’s value. It is a common form of real estate math.

Lenders use CLTV ratios to determine the risk of a loan. The higher the CLTV ratio, the greater the risk.

## How Is Combined Loan to Value Ratio Calculated?

To calculate CLTV, divide the total amount of all loans against a property by the property’s appraised value.

The result is expressed as a percentage.

For example, if you have two mortgages against your home with a combined balance of \$180,000 and your home is appraised at \$200,000, your CLTV would be 90 percent. (\$180,000/\$200,000 = .9 or 90 percent)

## What Does Combined Loan to Value Ratio Mean?

Lenders use a number of factors to determine the riskiness of a loan, and CLTV is one of them.

The higher the CLTV ratio, the greater the risk to the lender that the borrower will default on the loan.

As a result, loans with high CLTV ratios often have higher interest rates and may require private mortgage insurance (PMI).

## How Can I Lower My Combined Loan to Value Ratio?

There are a few ways to lower your CLTV ratio:

### Pay down the balance of your existing loans

This will lower the amount of loans against the property and increase the property’s value, resulting in a lower CLTV ratio.

If you have equity in your property, you may be able to refinance your loans and get a new loan with a lower interest rate.

If you think your property is worth more than the current appraised value, you can request a new appraisal.

If the appraised value is higher, your CLTV ratio will be lower.

## What Are the Risks of a High Combined Loan to Value Ratio?

A high CLTV can lead to a number of risks, including:

### Higher interest rates

A high CLTV means that you are borrowing a larger amount of money from the lender.

This can lead to higher interest rates on your loan, as the lender perceives you to be a greater risk.

### Difficult to refinance

A high CLTV can make it difficult to refinance your mortgage, as many lenders will not lend to borrowers with such a high LTV.

This can leave you stuck in a more expensive mortgage deal, and may even prevent you from moving house if you need to sell up.

### Negative equity

If property prices fall, then borrowers with a high CLTV can quickly find themselves in negative equity.

This means that they owe more money to the lender than the property is worth, and can be extremely difficult to get out of.

### Higher repayments

A high CLTV means that you will have to make higher monthly repayments, as you are borrowing a larger amount of money.

This can put a strain on your finances, and may make it difficult to keep up with your repayments if your circumstances change.

### Greater risk of repossession

If you fall behind on your mortgage repayments, then the lender may look to repossess your home. This is more likely to happen if you have a high LTV, as the lender will want to recoup as much of the money that you owe them as possible.

If you are considering taking out a mortgage with a high CLTV, then it is important to weigh up the risks and benefits carefully. Make sure that you can afford the higher monthly repayments, and be aware of the risks that you could face if property prices fall or your circumstances change.

## Loan-to-Value vs. CLTV

Loan-to-value (LTV) ratio is the ratio of a loan’s amount to the value of an asset purchased. The LTV ratio is used to determine risk; the higher the ratio, the greater the risk.

CLTV takes into account all loans against a property, not just one loan. For example, if you have a first mortgage with an LTV ratio of 80 percent and a home equity loan with an LTV ratio of 10 percent, your CLTV would be 90 percent.

## Combined Loan to Value Ratio – FAQs

### What is a combined loan to value ratio?

The combined loan-to-value (CLTV) is the ratio of all loans secured by a property to the value of that property. It is used by lenders as a measure of risk.

### What does a high CLTV mean?

A high CLTV ratio means that there is a higher risk that the borrower will default on the loan.

As a result, loans with high CLTV ratios often have higher interest rates and may require private mortgage insurance (PMI).

### How can I lower my CLTV ratio?

There are a few ways to lower your CLTV ratio:

• paying down the balance of your existing loans

### What are the risks of a high CLTV?

The higher your CLTV ratio, the greater the risk to the lender that you will default on your loan.

As a result, loans with high CLTV ratios will usually have higher interest rates and may require PMI to help protect the lender against the extra risk of default.

In addition, if you have a high CLTV ratio and your property value decreases, you may find yourself “underwater” on your loan, owing more than the property is worth. This can make it difficult to sell or refinance your property.

If you’re considering taking out a loan with a high CLTV ratio, be sure to shop around for the best terms and be prepared for a higher interest rate.

### What’s the difference between LTV and CLTV?

Loan-to-value (LTV) ratio is the ratio of a loan’s amount to the value of an asset purchased. The LTV ratio is used as a measure of risk, with a higher ratio denoting higher risk.

CLTV takes into account all loans against a property, rather than just one loan. For instance, if you have a first mortgage with an LTV ratio of 70 percent and a home equity loan with an LTV ratio of 5 percent, your CLTV would be 75 percent.

## Summary – Combined Loan to Value Ratio (CLTV)

The combined loan to value ratio is the ratio of all loans against a property to the property’s appraised value. Lenders use CLTV ratios to assess risk. The higher the ratio, the greater the risk to the lender.

Loans with high CLTV ratios often have higher interest rates and may require private mortgage insurance.

Borrowers can lower their CLTV ratio by paying down existing loans, refinancing their loans, or appraising their property.

If you’re considering taking out a loan with a high CLTV ratio, be sure to shop around for the best terms and be prepared for a higher interest rate.