In a sale where the buyer pays $50,000 cash and the balance with a mortgage on a sale price of $89,500, what is the loan-to-value ratio?

• A. 44%
• B. 39%
• C. 50%
• D. 40%

Answer: (A)

Loan-to-value measures how much of the purchase price is financed by the loan. Here, the loan amount is the purchase price minus the down payment: 89,500 − 50,000 = 39,500. Divide by the purchase price: 39,500 / 89,500 ≈ 0.441, which is about 44%. So the loan-to-value ratio is roughly 44%. In many cases lenders use the lower of the appraised value or purchase price, but with the given sale price, about 44% is the correct LTV.