The True Strength of Homeowners Today

Almost everyone these days is thinking about the real estate market. That's because the unsustainable market of the previous two years is over, and people can already tell the difference. What remains to be seen is how financially secure homeowners are nationwide. Over the last year, mortgage debt surpassed $10 trillion for the first time in history, which many viewed as a worrying indication.

What Is LTV?
LTV stands for loan to value ratio. Here is how the Mortgage Reports defines it for further information:

The size of your mortgage debt in relation to the value of your house is compared by the term "loan to value ratio" (LTV). Your LTV ratio is 90% if, for instance, your home is worth $200,000 but you only owe $180,000 on your mortgage because the loan only covers 90% of the entire cost.

LTV can also be viewed in terms of your deposit. A 20% down payment translates into borrowing 80% of the home's worth. Your LTV to Value Ratio is 80%.

Why Is This Important?
This is just another factor preventing the home market from collapsing. Homeowners can exercise influence thanks to their equity. For instance, if someone needed to sell their house, it's likely that they would have enough equity to do so while still making a profit. When many people owed more on their homes than they were worth in 2008, this was not the case.

Today's homeowners are in better financial shape than they have been since 1983. This is a result of both how homeowners have managed equity since the housing meltdown and the recent uptick in property values. And this is just another justification for homeownership in whatever market.

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