What does the Loan-to-Value Ratio (LTV) express?

The Loan-to-Value Ratio (LTV) is a financial term that conveys the relationship between the amount of a loan and the appraised value of the property securing that loan. This ratio is critical for lenders as it gives insight into the risk involved in financing a property. A higher LTV indicates higher risk, as it means a larger portion of the property's value is being financed through the loan, which can affect decisions regarding loan approval and interest rates. In general, lenders prefer lower LTV ratios, as these suggest that the borrower has more equity in the property, reducing the lender’s risk in the event of foreclosure.

The other options do not accurately define LTV. The total amount due on a loan refers to the overall debt owed, regardless of the property's value. The interest rate on a mortgage loan indicates the cost of borrowing but is not related to the property value or loan amount. The maturity date of the loan pertains to when the loan must be repaid in full, which, again, does not reflect the relationship between the loan amount and the property value.