The loan to value ratio of a property (including possibly on it established buildings) is the value, from due to the realizations derived from the long-term market happening for evaluation time on the basis of the durable, future-safe characteristics with high security expect will can that it via are enough, into which future directed the period imnormalen course of business is realized. (Definition from the principle paper of the federation of the German mortgage banks).

Again with the complete into force step the law to law for the re-organization of the mortgage bond right on 19 July 2005 the mortgage bond law (PfandBG) introduced (kind 1) and the mortgage bank legislation (HBG) one waived (kind 18).

To the term loan to value ratio and market value gives "§16 to exp. 2 PfandBG the following against: "“The loan to value ratio may not exceed the value, which itself in the context of a careful evaluation of the future marketability of a real estate and with consideration of the long-term, lasting characteristics of the object, which results in normal regional market conditions as well as the present and possible other uses. Speculative elements may not be considered thereby. The loan to value ratio may not exceed one in transparent way and after a recognized appraisal procedure determined market value. The market value is the estimated amount, for which a lending object could be sold at the evaluation deadline between a salesready salesman and a purchase-ready Erwerber, after appropriate marketing period, in a transaction in the usual course of business, whereby each party acts with expertise, circumspection and without obligation."” (Source: Law for the re-organization of the mortgage bond right of 22. May 2005, BGBl. I No. 29, P. 1373 FF.)

While the market value and/or the market value represents the current price of an object attainable at the market under normal circumstances, the loan to value ratio shows the value of the object from view of a credit institute, which this object during one period of 10 - 20 years to finance must. During this time the bank must be thus safe to be able to realize the accepted value of the object when utilization. This on a long-term basis and surely attainable value is the loan to value ratio.

Due to the objective to represent a safe upper limit for the possible lending the loan to value ratio has an authorization in relation to other value terms. The term exists however only in Germany. In all other countries there is in the long run only the term of the market value.

With the determination of the loan to value ratio security needs Kreditgeber.Daraus dominate are thus essentially derived the following demands on the loan to value ratio:

1. the determined value should be valid for as long future a period as possible
2. when yardsticks for the valuation should only from the past and present derived, steady value components are used, which can be regarded during the prognosis period as steady
3. all used base factors and value components must fulfill these requirements
4. unsecured future components for worth and increased returns may not be considered
5. to be considered only at the evaluation time as can be prove secured characteristics and yields, which would be entitled to the real estate with normal managements each owner durably, may
6. all used beginnings and worth-affecting factors must be comprehensibly documented
7. the lasting rentableness and marketability of the real estate must be estimated carefully
8. the usefulness and serviceability of the real estate must be examined carefully
9. all risks connected with the object must be stated

The loan to value ratio determination orients itself at the usual guidelines for the production of appraisal, the actual loan to value ratio however by a adept and to it authorized coworker of the respective credit institute is specified. The fixed loan to value ratio can deviate thus quite considerably from the calculated loan to value ratio. When defining of the loan to value ratio the so-called minimum value principle applies.

The loan to value ratio does not only find with the bank-internal credit decisions use. It is also the basis for the classification of a demand as credit on real property after KWG as well as with the charge of quiet reserves in real estates for own capital funds of the banks.

The loan to value ratio determination regulation - BelWertV was published to 22.05.2006 in its final version in the federal law gazette I No. 24 on page 1175. It comes into force to 01.08.2006.

Left to the published version of the BelWertV:

After "§ 13 HBG by the credit institutes the set up and by the BAFin approved valuation guidelines become then ineffective with the BelWertV.

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