LTV is an abbreviation of “Loan To Value” and expresses the ratio between the mortgage amount and the value of the mortgaged property. The LTV is quoted as a percentage and its maximum amount is set by the Czech National Bank. Although this indicator is a recommendation by the CNB, mortgage providers follow the limits set.
What does the LTV indicator say?
When taking out a mortgage, the bank is always interested in the value of the property being mortgaged. The LTV determines the maximum amount of mortgage the bank can give you for a given property. For example, if you are thinking of buying a flat worth CZK 3 million, the bank will lend you a maximum of CZK 2.7 million at 90% LTV.
The LTV is adjusted by the Czech National Bank according to the current market situation. In the past, the value of this indicator ranged from 80 to 100%. Currently, the LTV for new mortgages is allowed to be no higher than 90%. Applicants for a new mortgage must therefore cover at least 10% of the value of the property from their own savings. Those who have more of their own resources and apply for a mortgage covering, for example, 75% of the value of the property will get a better interest rate from the bank. The 90% maximum LTV limit does not apply to so-called investment mortgages, which require more own resources.