LTV (Loan to Value) — what is the loan-to-value ratio?
LTV, or Loan to Value — a ratio showing the relationship between loan amount and property value. Learn how it affects mortgage conditions.
Definition
LTV (Loan to Value) — a ratio expressing the relationship between the loan amount and property value. It shows what portion of the property value you're financing with debt.
Formula
LTV = (Loan amount / Property value) × 100%
Example
You're buying an apartment for 500,000 PLN. You make a 100,000 PLN down payment. Loan: 400,000 PLN.
LTV = 400,000 / 500,000 × 100% = 80%
Why is LTV important?
- Regulatory requirement — KNF (Polish Financial Supervision Authority) requires max LTV of 80–90% (depending on insurance)
- Impact on margin — the lower the LTV, the lower the bank's margin (lower risk)
- Low down payment insurance — at LTV > 80%, the bank may require additional insurance
Typical LTV thresholds in Poland
| LTV | Down payment | Consequences |
|---|---|---|
| ≤ 80% | ≥ 20% | Best conditions, no additional insurance |
| 80–90% | 10–20% | Low down payment insurance required or higher margin |
| > 90% | < 10% | Most banks will refuse |
How to lower LTV?
- Make a higher down payment
- Choose a cheaper property
- Make extra payments — LTV decreases with each overpayment
How Freenance can help
Freenance tracks the value of your properties and loan balance, automatically calculating current LTV. You can see how overpayments bring you closer to a better threshold.
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