What does the loan-to-value (LTV) ratio measure, and why does it matter to a lender?

The loan-to-value ratio is the loan amount divided by the lesser of the property's appraised value or sale price, expressed as a percentage. For example, a $240,000 loan on a $300,000 home is an 80% LTV. LTV matters because it reflects how much equity the borrower has and therefore the lender's risk: a high LTV (small down payment) leaves the lender more exposed if the borrower defaults and the property must be sold, which is why high-LTV loans often require private mortgage insurance. Brokers and agents should understand LTV because it affects loan approval, down-payment requirements, and the financing advice clients receive.