LTV is the single most important risk metric in mortgage underwriting. A lower LTV means the borrower has more skin in the game and the lender has a larger equity cushion if the property must be sold in distress.
In Switzerland, banks lend up to 80% LTV on owner-occupied homes (first mortgage 65%, second mortgage 15% which must be amortised in 15 years or by retirement). US conventional loans above 80% LTV trigger PMI; below 80% it can be dropped. UK lenders price mortgages in LTV bands — every step down to 75%, 60% or 50% unlocks a lower rate.
Formula
LTV = Loan Amount ÷ Appraised Property Value
Example
Buying a CHF 1,000,000 property with a CHF 200,000 down payment and an CHF 800,000 mortgage produces an 80% LTV — the regulatory ceiling for owner-occupied homes in Switzerland.