Which ratio expresses debt in relation to the value of a property?

The loan-to-value ratio is the ratio that expresses debt in relation to the value of a property. It is a crucial metric used in the real estate and financing industries to determine the risk associated with a mortgage loan. By calculating this ratio, lenders can assess how much of a property's value is financed through debt compared to how much is owned outright by the borrower.

The loan-to-value ratio is calculated by dividing the amount of the mortgage loan by the appraised value of the property. A higher ratio indicates that a buyer is relying more heavily on borrowed funds compared to their equity in the property, which can imply greater risk for the lender if property values decline.

This ratio is particularly relevant for assessing the creditworthiness of buyers and for determining the terms of loans, such as interest rates and down payment requirements.