Loan to value ratio
From CaseyPedia
The Loan-to-Value Ratio (LTV) is the amount of money being borrowed versus the value of the home. For example, if a house cost $250K, and you get a loan for $200K, your LTV would be 80% or 200/250 = 4/5.[1]
As the LTV goes higher, the mortgage payments and interest rates also will go up. As in Snowflake's case, he figured that since he was flipping properties, he'd make some sweet cash before the above ever came into consideration. Therefore, he sought loans that not only were prohibitly large, but took out a second loan to cover the rest.
For example, his Highland property was 350K. Since he was a little short on money, he had two loans taken out to purchase the property. But, rather than play it safe, Casey took an extra $10K out for repairs, saying it would improve the property.[2] It should be pointed out that this actually managed to make the LTV 110%, a ratio that would make most sane people would reevaluate their needs and find a smaller house.
It should also be noted that Casey lied repeatedly on loan applications where he overstated his income to obtain these high LTV's. The money he had left over, either 100%+ LTV's or Cashbacks can also be considered dirty pennies as he lied about the purpose of the funds.[3] Whereas it was to be used on the house, he instead used them on shiny things.
[edit] References
- ↑ Explanation of LTV, DoItYourself.com
- ↑ Utah Property Details
- ↑ Casey admits to improper Use
