Loan-to-Value (LTV) is a regulatory tool used by financial institutions to determine a borrower's creditworthiness when granting a loan. It is defined as the percentage of the value of a property that is the subject of the loan, compared to the loan amount itself. The ratio is calculated by dividing the loan amount by the appraised value of the property. For example, if a borrower is seeking a loan for $200,000 on a property valued at $250,000, the LTV ratio would be 80%.

The advantage of having a lower LTV ratio is that lenders are more likely to grant a loan for a lower rate or with more favourable terms. Generally speaking, financial institutions view LTVs at or below 80% as favourable and will offer the borrower a competitive loan rate.

In some cases, lenders may grant a loan with an LTV ratio of more than 80%. This is sometimes seen when a borrower only has a small down payment and requires PMI (Private Mortgage Insurance), a policy that protects the lender in case the borrower defaults. However, when lending with an LTV at or above 80%, lenders will often charge a higher interest rate.

In conclusion, Loan-to-Value is a very important factor when evaluating a borrower's creditworthiness and serves as a benchmark for loan pricing. The lower the LTV ratio, the more favourable the loan rate, but often requires a large down payment. Borrowers with access to gift funds or other loan programs may qualify for mortgages with lower down payments, but will likely pay higher interest rates. When considering a loan, it's important to keep in mind how the LTV ratio will affect the rate and terms.