What it is
Loan-to-value measures how much of a property's value the lender is financing. The rest is the borrower's equity, the cushion that protects the lender if values fall or the loan has to be foreclosed. Lower LTV means more cushion and, usually, better terms.
How it's calculated
Divide the loan amount by the property value.
| Input | Amount |
|---|---|
| Appraised value | $10,000,000 |
| Loan amount | $7,000,000 |
| LTV | 70% |
The LTV calculator handles the math and shows the equity required at different leverage points.
Which value?
This is where brokers get caught. On an acquisition, many lenders size to the lower of purchase price or appraised value. On a refinance, they use the appraisal, and the appraiser is working for the lender. Your client's opinion of value, a broker's opinion of value or a cap rate you picked yourself does not count.
How lenders use it
LTV is one of the core limits in loan sizing, alongside DSCR and debt yield. Each lender has a maximum, and the maximum moves with the loan type, asset class and market. As a rough frame, stabilized permanent loans commonly top out somewhere in the 60% to 80% range, with agency multifamily often at the higher end and specialty assets lower. Every lender's box is different, so check the actual number before you quote it to a client.
Lenders also look at combined LTV when there is subordinate debt. If the senior loan is at 60% and mezzanine debt takes it to 75%, the senior lender will want to know.
For ground-up projects, lenders care more about loan-to-cost than LTV, though many check both.
Common mistakes
- Assuming the appraisal will hit the purchase price. If it comes in 5% light, a 75% LTV loan becomes a 71% loan, and the sponsor needs more equity at the closing table.
- Ignoring the binding constraint. A deal can pass on LTV and still be cut by DSCR or debt yield. Run all three.
- Quoting maximum leverage to the client too early. It sets an expectation the market may not meet.
In the package
Show value support: the purchase contract, a recent appraisal if there is one, sales comps and the cap rate logic. A lender that agrees with your value agrees with your LTV. Dori checks each deal's LTV against every lender's maximum and surfaces the hard fails before anything goes out through lender matching.