What is the term for the ratio of debt to the value of a property?

The term that describes the ratio of debt to the value of a property is the loan-to-value ratio (LTV). This ratio is a critical measure used in real estate and mortgage lending, as it helps lenders assess the risk associated with providing a loan. The LTV ratio is calculated by dividing the amount of the loan by the appraised value of the property. A lower LTV ratio generally indicates lower risk for the lender, as it shows that the borrower has invested more of their own equity into the property, while a higher LTV ratio indicates that a significant portion of the property's value is financed through debt.

In real estate transactions, lenders often use the LTV ratio to determine the terms of the mortgage, including interest rates and whether private mortgage insurance (PMI) is required. Understanding this ratio is essential for both lenders and borrowers when assessing the overall financial health of a real estate investment.