What do the LTV and DTI ratios mean in a mortgage loan?

What Is LTV (Loan-to-Value)?

The LTV (Loan-to-Value) ratio expresses the percentage of financing granted in relation to the property’s commercial value. It is calculated as the loan amount divided by the property value.

Formula:

LTV = Loan Amount / Property Commercial Value

Example:
Property value: €200,000
Loan amount: €160,000

LTV = 160,000 / 200,000 = 80%

In Greek banking practice, LTV typically ranges up to 75%–80%, depending on the borrower’s profile and the bank’s policy.

The higher the LTV:

The greater the risk for the bank
The interest rate may increase
Additional collateral may be required

What is DTI (Debt-to-Income)?

The DTI (Debt-to-Income) ratio indicates the percentage of monthly income allocated to the repayment of loan obligations.

Formula:

DTI = Total Monthly Obligations / Net Monthly Income

Example:
Net monthly income: €2,000
Total installments (including the new loan): €800

DTI = 800 / 2,000 = 40%

In most cases, Greek banks prefer the DTI not to exceed 35%–40%.

A high DTI means:

Limited capacity for additional borrowing
Increased likelihood of rejection
Lower approved loan amount

How are LTV and DTI combined in practice?

Mortgage approval is not based on a single ratio.

The bank simultaneously assesses:

Whether the property value justifies the requested amount (LTV)
Whether the income can support the installment (DTI)
The borrower’s credit history
Employment stability

A borrower with a low LTV but high DTI may face limitations, while the opposite scenario may also raise concerns.

In practice, the appropriate strategy is not to “push” the maximum allowable ratio, but to structure financing in a way that remains sustainable over the long term.

Conclusion

The LTV and DTI ratios are key risk assessment mechanisms used by banks. Understanding them allows a prospective borrower to determine in advance:

How realistic the requested amount is
How much own contribution is required
What installment level is considered sustainable