What does the acronym CLTV stand for?

The acronym CLTV stands for Combined Loan-To-Value. This term is crucial in mortgage lending as it represents the total amount of all loans secured by a property in relation to its appraised value or purchase price. CLTV is calculated by adding together the amounts of all mortgages and other loans secured by the property, then dividing that sum by the property’s appraised value or sales price, whichever is less.

Understanding CLTV is important for lenders because it helps assess the risk associated with issuing a loan. A higher CLTV may indicate higher risk since it suggests that the borrower has less equity in the property. Conversely, a lower CLTV could indicate a safer lending position since the borrower has more equity. This metric is often considered alongside other factors when underwriting loans or determining terms and conditions.

While other options mention different iterations of "loan-to-value," they do not accurately capture the specific meaning of CLTV, as they either refer to variations that do not exist in standard lending terminology or include information that mischaracterizes the components associated with CLTV.