Home / Glossary / LTV (Loan-to-Value)
LTV (Loan-to-Value)
The ratio of a loan amount to the appraised value of the property.
Definition
Loan-to-Value is calculated by dividing the mortgage amount by the property's appraised value or purchase price, whichever is lower. For example, a $600,000 loan on an $800,000 property produces a 75% LTV. Lenders use LTV to gauge risk — higher LTVs mean less borrower equity and more lender exposure. Most DSCR programs cap LTV at 75% to 80%, though some allow up to 85% with pricing adjustments. A lower LTV generally earns you a better interest rate and may reduce or eliminate the need for additional reserves.
How This Relates to DSCR Loans
LTV is a primary pricing lever in DSCR loans. Dropping even 5% in LTV can significantly improve your rate and reduce lender overlays.
Related Terms
CLTV
Combined Loan-to-Value — the total of all loans on a property divided by its appraised value.
Equity
The difference between a property's market value and the outstanding mortgage balance.
Appraisal
A professional assessment of a property's market value, required by lenders before funding a loan.
Loan-to-Cost
The ratio of the loan amount to the total project cost including acquisition and renovation.
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