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The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.
Additionally, a loan with a high LTV ratio may require the borrower to purchase to offset the risk to the lender. This type of insurance is called private mortgage insurance (PMI).
Source: Investopedia
