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In the event a bank commitment letter specifies a 75% Loan-to-Value ratio for a $1,000,000 project,...

  1. In the event a bank commitment letter specifies a 75% Loan-to-Value ratio for a $1,000,000 project, which subsequently appraises for $960,000, what will the bank ultimately loan on the project?
    1. $750,000
    2. $960,000
    3. $720,000
    4. $830,000
    5. $830,000
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Answer #1

LTV Ratio = Amount Borrowed / Appraised Value

0.75 = Amount Borrowed / $960,000

Amount Borrowed = 0.75 * $960,000 = $720,000

Hence, Option "c" is correct.

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