LTV stands for loan-to-value ratio. It is a measure of how much of a lender's money is being used to finance an asset, such as a home. The LTV ratio is calculated by dividing the amount of the loan by the appraised value of the asset.
There are three different variations on LTV:
LTV (loan-to-value) ratio is the ratio of the loan amount to the appraised value of the property or the purchase price, whichever is lower. For example, if you have a $200,000 loan and the appraised value of your home is $250,000, your LTV ratio is 80%.
CLTV (combined loan-to-value) ratio is the ratio of the total loan amount to the appraised value of the property (or the purchase price, whichever is lower) including any existing liens on the property. For example, if you have a $200,000 loan and the appraised value of your home is $250,000, and you have a $10,000 second mortgage, your CLTV ratio is 84%.
HCLTV (home equity-combined loan-to-value) ratio is the ratio of the total loan amount to the appraised value of the property (or the purchase price, whichever is lower), including any existing liens on the property and the full amount of any home equity lines of credit (HELOCs). For example, if you have a $200,000 loan and the appraised value of your home is $250,000, and you have a $10,000 second mortgage and a $15,000 HELOC limit, your HCLTV ratio is 90%.
In general, lenders prefer lower LTV, CLTV, and HCLTV ratios because they indicate that the borrower has a larger down payment and more equity in the property. This makes the borrower less likely to default on the loan.