Loan-to-value ratio for mortgage loans (microloans) and the size of a down payment
| LTV = | Mortgage loan principal |
* 100% |
| Collateral (property) value |
The calculation of the ratio between the mortgage loan (microloan) principal and the fair value of the collateral includes the outstanding loan (microloan) amount in the balance sheet account as of the date of calculating capital adequacy ratios.
This is one of the key risk indicators in mortgage lending. A high LTV ratio means that a borrower finances the purchase of real estate mostly with borrowed funds. In this case, the lender’s risk is higher, as the borrower has a smaller equity stake in the property. A very high LTV ratio means that, in the event of a default on such a loan, the bank will be less capable of covering losses by using the collateral.
For loans granted under shared construction agreement where the collateral is still under construction, the amount of a down payment is used instead of an LTV ratio. It is calculated as follows:
| DP = | Down payment |
* 100% |
| Amount under a shared construction agreement |
Loans with a large down payment or a low LTV ratio are less risky. Based on these risk metrics coupled with DSTI, the Bank of Russia sets macroprudential add-ons and limits for mortgages and loans under shared construction agreements.
An LTV ratio and the amount of a down payment are calculated in accordance with Bank of Russia Ordinance No.