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January 19, 2023
The loan-to-value (LTV) ratio is a risk evaluation used by financial institutions and other lenders before authorizing a mortgage. Loan evaluations with high LTV ratios are often considered higher-risk loans. As a result, the loan's interest rate will be greater if the mortgage is approved. Furthermore, a loan with a high LTV ratio may need the purchase of mortgage insurance by the borrower to mitigate the lender's risk. This is referred to as private mortgage insurance (PMI).