Combined Loan To Value


The ratio of the total amount borrowed on all mortgages against a property compared to the appraised value of the property. For example, if you have an $80,000 1st mortgage and a $10,000 2nd mortgage on a home with an appraised value of $100,000, the CLTV is 90% ($80,000+$10,000 = $90,000 / $100,000 = 90%).

All About Secured Loans


With many personal loans, the only security required for the loan is your signature as a representation of your willingness to repay. However, in some circumstances lenders may require that security take the form of real estate, or investments such as stocks and bonds. When these types of assets are offered as security, they are referred to as collateral.

By offering collateral, you may be able to borrow more than you could simply on your signature. As well, it is also very likely that you will be able to borrow at a lower interest rate. The reason for this is that if you default, the lender can take possession of the collateral as payment toward the balance of the loan.

In order to benefit from the secured rate, loans must often be 100 percent secured. Real estate equity and investments such as Savings Bonds, GICs or debentures, and mutual funds are often used as collateral. For collateral other than real estate, often referred to as "paper securities," only a percentage of the asset's value may be accepted as security. This is referred to as the "margin requirement." The amount you qualify to borrow will be based on the fair market value of the security — what it's worth when you're using it as collateral, not what you paid for it.

Margin requirements vary with the type of security being pledged and from one financial institution to another. For example, typically only 50 percent of the market value of stock is accepted as security for a loan. The reason is that the price of stocks can be volatile, increasing or decreasing very quickly. Since, typically, only 50 percent of their market value will be accepted as collateral, even significant decreases in value will not result in insufficient collateral to cover the loan.

Assets pledged as collateral are reviewed periodically, and if the value of the assets has decreased and there is not enough collateral to cover the loan, you will be asked to pledge additional assets to secure the loan.

In legal terms, most movable property such as cars, boats and trailers are referred to as chattels. When you use this type of property to secure a loan, you are often required to sign a promissory note and a chattel mortgage giving the lender the right to take possession of the property if you default on the loan. Most car loans are actually chattel mortgages with the car being used as security for the loan.

A chattel mortgage contains a number of conditions that you must meet. For example, you cannot use the same property as security for any other loan or PLC, the property cannot be sold without the permission of the lender, nor can the property be removed from the jurisdiction outlined by the lender.

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