How do you calculate 1-year LTV?

The 1-year loan-to-value (LTV) ratio measures the percentage of the property's value that is financed by the loan after 1 year of mortgage payments. It provides insight into how quickly a borrower's equity position improves.

To calculate the 1-year LTV, first note the original loan amount and the appraised property value. Next, an amortisation schedule will be used to determine the loan balance remaining after 12 monthly payments.

Then apply the LTV formula:

LTV Ratio = (Loan Amount / Appraised Value) x 100

For example, if the original loan amount was ₹20 lakhs for a property valued at ₹25 lakhs, and the loan balance after 1 year is ₹19 lakhs, the 1-year LTV calculation would be:

(₹19 lakhs / ₹25 lakhs) x 100 = 76%

The lower the 1-year LTV percentage, the more equity the borrower has built up. Comparing the 1-year ratio to the original LTV helps assess early mortgage payoff and evaluate refinance options.