What is a loan-to-value ratio?

A loan-to-value (LTV) ratio, also known as loan-to-appraisal/appraised value ratio, is a measure of how risky you are as a borrower.

It is one of the things that Pag IBIG Fund looks into in determining how much housing loan you can borrow.

LTV ratio can be computed using the following formula:

LTV = (Loan Amount) / (Appraised Value)

The loan amount is obviously the money you wish to borrow from Pag IBIG to finance the purchase of a property.

The appraised value, on the other hand, is how much the property actually costs in the prevailing market rate. This may or may not be the same as the selling price.

Pag IBIG Fund, as well as banks, have accredited and licensed appraisers who estimate the value of properties.

Let’s say you want to purchase a property currently valued at Php 3 million (appraised value). To finance the purchase of the said real estate, you want to borrow Php 2.4 million from Pag IBIG.

Using the formula above, we can now compute the LTV ratio:

LTV = (2,400,000) / (3,000,000)

LTV = 80%

As a rule, Pag IBIG has set a limit to the LTV ratio depending on your loan amount (see table below)1. In the above example, the LTV ratio is reasonable for the loan amount since it doesn’t exceed 90%.

pag ibig housing loan 11

Note: The LTV ratio for socialized housing loans can be as high as 100% (meaning you can borrow the full price of the property) provided that the developer’s license to sell is intended for socialized housing and the loan purpose is for the purchase of a residential unit. 

So how exactly does Pag IBIG gauge how risky you are as a borrower using the LTV ratio?

It all boils down to equity or how much you own in the property.

Equity is the reverse of the LTV ratio. Therefore, if your LTV ratio is 80%, your equity is only 20%. This means you owe (LTV ratio) more than you own (equity).

For this reason, the higher the LTV ratio, the riskier you are as a borrower in the same way that the higher your equity, the less risky you are and the more likely your loan will get approved. 

Higher equity means you are tied up to your property. Hence, in case you default on your housing loan, the lender (in this case, Pag IBIG) will have more equity in the property and have a better chance of recovering what you have borrowed.

Go to the main article: How to Apply for Pag-IBIG Housing Loan: An Ultimate Guide



  1. Pag-IBIG Fund. (2018). Pag-IBIG Circular No. 402 (Determination of Loanable Amount Based on Capacity to Pay and Loan-to-Appraised Value Ratio Under Pag-IBIG Fund End-User Home Financing Program). Makati City.