What does a lower loan to value ratio indicate about a borrower’s equity?

A lower loan-to-value (LTV) ratio indicates that a borrower has more equity in the property. The LTV ratio is calculated by dividing the amount of the loan by the appraised value of the property. When this ratio is low, it means that the borrower is financing a smaller portion of the property's value with a loan, implying that they have contributed a larger down payment or that the property has appreciated significantly.

This increased equity is beneficial for the borrower, as it provides a buffer against market fluctuations and reduces the lender's risk. Higher equity can also enable the borrower to secure better loan terms or rates because it demonstrates financial stability. Overall, a lower LTV ratio signifies that the borrower has a higher percentage of ownership in the property compared to the amount they owe.