If a borrower owes $200,000 on a first mortgage and $50,000 on a line of credit with an appraisal value of $500,000, what is the CLTV?

To determine the Combined Loan-To-Value (CLTV) ratio, you add together all outstanding loans secured by the property and then divide by the appraised value of the property.

In this case, the borrower has a first mortgage of $200,000 and a line of credit of $50,000. When these amounts are combined, the total debt is $250,000. The property appraises for $500,000.

To calculate the CLTV, you divide the total loans ($250,000) by the appraised value ($500,000), and then multiply by 100 to convert it into a percentage:

[

\text{CLTV} = \left( \frac{250,000}{500,000} \right) \times 100 = 50%

]

Thus, the CLTV ratio is 50%, indicating that half of the property’s value is encumbered by debt. This metric is essential in assessing the risk when a lender evaluates a mortgage application, as it helps determine how much equity the borrower has in the property. A lower CLTV generally indicates less risk for lenders.