Loan-to-Value (LTV) is a financial metric used to assess the risk of a loan by comparing the amount of the loan to the appraised value of the collateral securing it. Expressed as a percentage, LTV is calculated by dividing the loan amount by the collateral's value. A lower LTV indicates a smaller loan relative to the collateral's worth, reducing the lender's risk, while a higher LTV suggests greater exposure. LTV is a key factor in underwriting decisions, influencing loan terms, interest rates, and eligibility.

It is widely used in mortgage lending, asset-based financing, and other secured lending scenarios to ensure prudent risk management and alignment with regulatory requirements.

## Secured policies

In Canopy, you have the ability to set the max allowed LTV via a line or loan's policies. For example, say you wanted to add secured policies around where as a lender you wanted to be notified by a breach in your max allowed LTV. In the create line of credit template, you would supply the percentage in your `secured_policies`

```json
{
    "template_id": "secured_line_of_credit",
    "policies": {
       ...
        "secured_policies": {
            "max_allowed_ltv": 95.5,
			...
        }
    }
}
```

These policies can be applied for either a line or a loan.

Another key policy is `ltv_type`, this takes into account how LTV is calculated. Currently Canopy supports the following types:

| Value | Description |
| --- | --- |
| CURRENT_BALANCE_LTV | Would use current line/loan amount and most recent/current valuation |
| CREDIT_LIMIT_LTV | Applicable only to lines of credit, where the lender wants to be conservative and assume the line is “fully-extended” (meaning there’s no available credit left) |

The above is also added during line/loan template creation.