What does CLTV stand for in mortgage terminology?

CLTV stands for Combined Loan-to-Value ratio, which is a critical metric used in mortgage lending. It measures the total amount of all loans secured by a property, divided by the appraised value of that property. The CLTV ratio is particularly important for lenders as it helps them assess the risk associated with a loan. A higher CLTV indicates a higher risk because it means the borrower is financing a larger portion of the property's value with debt, which could lead to a greater likelihood of default in case of financial distress.

In the context of mortgage lending, understanding CLTV assists lenders in making decisions regarding loan approvals, interest rates, and mortgage insurance requirements. It is essential for potential borrowers to be aware of the CLTV when considering multiple loans or second mortgages, as it impacts both their borrowing capacity and the terms of those loans.