Combined Loan-to-Value (CLTV) Ratio

    flowchart TB
	    A[Total Secured Loans] -->| ÷ | B[Appraised Value of Property]
	    B --> C{Multiply by 100}
	    C --> D[Combined Loan-to-Value Ratio (CLTV)]

## What does the CLTV ratio measure? - [x] The ratio of all secured loans on a property to its value - [ ] The ratio of total household income to monthly expenses - [ ] The cost of avocado toast compared to your monthly budget - [ ] The number of plants you can fit in your living room > **Explanation:** The CLTV ratio specifically measures the combined amount of all secured loans on a property against its value. Not quite the avocado thing, but a close financial cousin! ## If your CLTV is 90%, what does this mean? - [x] You owe 90% of your property's value in secured loans - [ ] You are guaranteed a loan from every lender - [ ] You should consider becoming a hermit - [ ] You are facing a karaoke showdown with your banker > **Explanation:** A 90% CLTV means you're carrying a significant amount of debt against your property, which denotes higher risk – no karaoke necessary! ## What is a healthy target CLTV ratio for most lenders? - [ ] 55% - [ ] 100% - [x] 80% - [ ] 200% > **Explanation:** Generally, lenders prefer a CLTV of 80% or less to reduce their risk, as compared to a higher unhealthy CLTV ratio. ## Which loan is typically NOT included in the CLTV calculation? - [ ] First mortgage - [ ] Second mortgage - [x] Personal loan - [ ] Home equity loan > **Explanation:** Personal loans are unsecured and separate from mortgage debt; hence, they don’t contribute to the CLTV ratio. ## If your property's value increases, what happens to your CLTV, assuming loan amounts remain the same? - [ ] CLTV decreases - [ ] CLTV remains the same - [x] CLTV decreases - [ ] CLTV increases > **Explanation:** If your property becomes more valuable but your loans stay the same, your CLTV decreases, which could be a good thing like finding a forgotten $20 bill! ## What is the effect of a high CLTV? - [ ] Lower mortgage interest rates - [ ] Higher chances of loan approval - [x] Increased risk of default - [ ] More lenders want your business > **Explanation:** A high CLTV signifies greater cumulative debt risk, making lenders nervous – kind of like that friend who always forgets their credit card! ## What contributes to a high CLTV? - [ ] Paying down first mortgage loan quickly - [ ] Renovating your house extensively - [x] Having multiple secured loans against the property - [ ] Always being on time with your payments > **Explanation:** More loans equate to a higher CLTV. Ironically, a substantial renovation may not help if you have also borrowed excessively. ## In times of economic downturn, what should borrowers do regarding CLTV? - [x] Monitor the CLTV closely and reduce debt - [ ] Keep borrowing more to maintain lifestyle - [ ] Ignore the CLTV; it sounds boring anyway - [ ] Throw a party and hope for the best! > **Explanation:** During downturns, being proactive about managing risk (like keeping an eye on CLTV) is wiser than partaking in party shenanigans. ## A CLTV of 110% indicates: - [ ] All is well financially - [x] You owe more than your property is worth - [ ] You must be purchasing a luxury yacht instead - [ ] It's time to panic > **Explanation:** A CLTV over 100% signals financial trouble, revealing that you owe more than the property's worth – not what we'd call a financial yacht! ## Why should you care about CLTV when applying for a mortgage? - [ ] It determines dinner options for your bank manager - [x] It affects your loan approval chances and terms - [ ] It has no impact – your meeting is more important - [ ] It can be repeatedly ignored and still work out fine > **Explanation:** CLTV influences approval decisions and terms; thus, it's wiser to know the implications, like ensuring a good meal for the banker doesn’t backfire!