noun · /ɛl tiː viː/
LTV
Also known as: Loan-to-Value, Loan-to-Value Ratio
Definition
LTV (Loan-to-Value) is the ratio of a mortgage loan to the appraised value of a property, expressed as a percentage. It's one of two primary constraints lenders use to size loans—the other being DSCR. A 75% LTV means you're borrowing 75% of the property's value and providing 25% as a down payment (equity).
Formula
LTV = (Loan Amount ÷ Property Value) × 100
Example: $3,000,000 loan ÷ $4,000,000 value = 75% LTV
Maximum LTV by Loan Type
Different loan programs have different maximum LTV limits. Higher LTV means less equity required but typically comes with higher rates or stricter terms:
| Loan Type | Max LTV | Notes |
|---|---|---|
| SBA 504 | 90% | Owner-occupied, requires 51%+ occupancy |
| Agency (Fannie/Freddie) | 75–80% | Multifamily only, best rates |
| CMBS | 65–75% | Non-recourse, all property types |
| Bank Loans | 65–75% | Often requires recourse/guaranty |
| Bridge/Hard Money | 70–80% | Higher rates, short-term |
| Life Insurance | 60–70% | Conservative, quality assets only |
LTV vs. DSCR: Which Constrains?
Loans are sized to the more conservative of LTV and DSCR. A property might support 80% LTV based on value, but if NOI only supports 70% at the required DSCR, you'll get the lower amount. This is called "constraining to DSCR."
LTV Calculation Example
You're acquiring a 40-unit apartment building. Here's how to determine maximum loan amount:
Property Details
Lender Terms
Maximum Loan Calculation
Required equity: $5,000,000 − $3,750,000 = $1,250,000 (25% down payment)
Why Lesser of Price or Value?
Lenders use the lower amount to prevent over-leveraging. Even if the property appraises higher than your purchase price, you can't borrow against the "instant equity." This protects the lender if you overpaid or if values decline.
LTV vs. LTC: What's the Difference?
LTV (Loan-to-Value)
Compares loan to property value (appraised or purchase price).
LTV = Loan ÷ Property Value
Best for: Acquisitions, refinances, stabilized properties
LTC (Loan-to-Cost)
Compares loan to total project cost (land + hard + soft costs).
LTC = Loan ÷ Total Project Cost
Best for: Construction, development, heavy value-add
Example: Value-Add Deal
Purchase Price: $4,000,000
Renovation Budget: $800,000
Total Cost: $4,800,000
After-Repair Value: $6,000,000
Loan Amount: $3,600,000
LTC: $3.6M ÷ $4.8M = 75%
LTV (current): $3.6M ÷ $4M = 90%
LTV (ARV): $3.6M ÷ $6M = 60%
How LTV Affects Your Loan Terms
Interest Rate
Higher LTV = higher rate. Lenders charge a premium for riskier loans. Dropping from 75% to 65% LTV might save 25-50 basis points.
Recourse Requirements
Higher LTV often requires personal guarantees. Lower LTV may qualify for non-recourse financing, protecting your personal assets.
Reserve Requirements
High-LTV loans may require larger escrows or operating reserves to protect against cash flow disruptions.
Determine Your Property's Lending Value
Upload your rent roll to calculate income-based value and understand how much financing your property can support.