What is a loan-to-value ratio (or Ltv)?
The Ltv is very leading in determining the whole of capital that can be obtained to finance a given property. Ltv relates the principle measure of a mortgage to the appraised value of a property. This Ltv is very similar to collateral discounting as it serves to protect the lender's debt stake in the property.
Ltv = whole of Loan / Value of Property
The lender will determine an Ltv value based on factors such a financial history of the business, prestige scores, length of loan, etc. After which, the lender will multiply the Ltv by the appraised property value to determine the maximum loan whole that can be given to a borrower.
Amount of Loan = Value of property * Ltv
Clearly, without other considerations the borrower benefits from a higher Ltv ratio.
What is Debt aid Coverage Rate (or Dscr)?
The Dscr approaches the mortgage picture from an entirely different angle than the Ltv. Where the Ltv determines the loan whole based on the value of the property, the Dscr bases upon the cash flow of the property and/or borrower.
Dscr = Debt aid / Cash flow
The debt aid is regularly taken as an yearly outline that includes both refund of principle and interest payments for a given year. Cash flow is calculated by taking adding noncash expenses back to net wage such as depreciation.
Once again, the lender will use factors such as firm credit, industry risk, etc. To call a outline for Dscr. regularly this will be colse to 1.20. After which, the total debt aid is calculated and a total loan whole derived from it.
Debt aid = Cash Flow * Dscr
Without other considerations the borrower can advantage from a lower Dscr ratio, but remember a borrower will regularly feel the pain of an under calculated Dscr (Not being able to pay the monthly mortgage!) before that of an Ltv.