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    Loan to Value Ratio (LTV)

    The loan amount as a percentage of a property's appraised value, showing how much of the purchase a lender will finance.

    Loan to value, or LTV, compares the loan amount to the appraised value of the property securing it. If a lender offers $750,000 against a building worth $1,000,000, the LTV is 75%. The remaining 25% is the equity the borrower brings to the table.

    Commercial LTV limits vary by asset type and program. Conventional CRE loans usually cap out at 70 to 75%, agency multifamily can reach 80%, and bridge lenders often stay at 65 to 70% because of added risk. On a purchase, the lender uses the lower of the price or the appraised value.

    Lower LTV means more borrower equity and less lender exposure, which typically earns a better rate. Higher LTV stretches proceeds but usually comes with pricing add ons or a personal guarantee.

    Formula
    LTV = Loan Amount / Appraised Value
    Worked Example

    A borrower buys an industrial property appraised at $2,000,000 and requests a $1,400,000 loan. LTV = 1,400,000 / 2,000,000 = 70%. The borrower funds the other $600,000 as a down payment.

    Why It Matters

    LTV decides how much cash you need at closing and how a lender prices risk. Push the ratio too high and you may trigger rate add ons, a guarantee, or a decline. Keep it modest and you often win better terms.

    Related Terms

    Loan to Cost Ratio (LTC)

    The loan amount as a percentage of total project cost, used mostly on construction and value add deals.

    Capitalization Rate (Cap Rate)

    The ratio of net operating income to property value, used to gauge return and estimate what a property is worth.

    Recourse

    A loan feature that lets the lender pursue the borrower's personal assets if the collateral does not cover the debt.

    Capital Stack

    The layers of financing in a deal, ranked by repayment priority from senior debt to common equity.

    Related Programs & Tools

    Commercial MortgageMax Loan CalculatorHow to Finance Commercial Property

    Looking for another term? Browse the full commercial lending glossary.

    Frequently Asked Questions

    Conventional CRE loans usually top out at 70 to 75%. Agency multifamily can reach 80%, and bridge or hard money lenders often stay near 65 to 70%.

    On a purchase, lenders use the lower of the contract price or appraised value. On a refinance, they use the appraised value.

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