To compute CLTV, you divide (1st loan + 2nd loan) by the lesser of sale price or appraised value. If 1st loan is $100,000 and 2nd loan is $50,000, and the lesser of sale price or appraised value is $150,000, what is the CLTV?

To compute CLTV, you divide (1st loan + 2nd loan) by the lesser of sale price or appraised value. If 1st loan is $100,000 and 2nd loan is $50,000, and the lesser of sale price or appraised value is $150,000, what is the CLTV?

• A. 100%
• B. 80%
• C. 90%
• D. 75%

Answer: (A)

CLTV measures how much debt is secured by the property relative to its value. To compute it, add all loans secured by the property and divide by the value you’re using as the denominator (the lesser of sale price or appraised value). Here, the total of the two loans is 100,000 plus 50,000, which equals 150,000. The denominator is the lesser of sale price or appraised value, which is also 150,000. So 150,000 divided by 150,000 equals 1.0, or 100%. This shows the combined loans exactly match the collateral value. If the total loans exceeded the collateral value, CLTV would be above 100%; if less, it would be under 100%.

CLTV measures how much debt is secured by the property relative to its value. To compute it, add all loans secured by the property and divide by the value you’re using as the denominator (the lesser of sale price or appraised value).

Here, the total of the two loans is 100,000 plus 50,000, which equals 150,000. The denominator is the lesser of sale price or appraised value, which is also 150,000. So 150,000 divided by 150,000 equals 1.0, or 100%.

This shows the combined loans exactly match the collateral value. If the total loans exceeded the collateral value, CLTV would be above 100%; if less, it would be under 100%.