CLTV, also know as Closing Loan to Value, is the percentage of how much a house is worth compared to how much is owed on all mortgages on the property.
Example: House is worth $300,000 and 1st mortgage balance is $130,000 and second mortgage balance is $80,000 (total of mortgages is 130k + 80k = 210k)= 70% CLTV
It's important to note that the higher the CLTV, the higher the risk to the lender and therefore, the higher the interest rate given.
That being said, you'll need above average credit scores to qualify for 100% CLTV in today's market.
Check with your mortgage expert for current lender guidelines regarding CLTV, or contact Home Jones at 415-617-5448 with any questions.
The mortgage lender who holds the second mortgage is in second lien position. What that means is that in the event of a foreclosure they are paid after the first mortgage holder receives money from the foreclosure sale. If there is no money left over then they will not be paid. To help offset this risk second mortgage interest rates are always higher than the first mortgage interest rate.
CLTV is also referred to as combined loan to value and is used by lenders to figure the overal risk of a loan. The higher the combined loan amount compared to the properties value will affect what programs and rates you will qualify for.
A loan that is 100% CLTV means that you owe the same amount that the home is worth - you have no equity.
Many times you will need to do a second mortgage at a different bank than the first, as to avoid a conflict - due to Combined Loan to Value(CLTV) guideline restrictions on the first mortgage that is also financed by the same bank.