Loan-to-Value (LTV)
The unpaid loan balance divided by the property's value, expressed as a percentage. Higher LTV means more leverage.
Definition
Loan-to-value (LTV) measures how much of a property's value is financed with debt. Lenders set maximum LTVs by product and risk: many small bay bank loans cap around 65–75% of appraised value, with tighter limits for construction, lease-up, or weaker sponsorship. At purchase, LTV is usually loan amount divided by the lower of purchase price or appraised value. As the loan amortizes or value changes, current LTV moves. 0% LTV means no debt (under-leveraged / free and clear). 100% LTV means the loan equals the value (fully leveraged). LTV sits alongside DSCR: a deal can pass LTV and fail coverage, or the reverse.
Formula
LTV = Loan Amount / Property ValueExample
A buyer finances $1,050,000 on a $1,500,000 small bay purchase. LTV = $1,050,000 / $1,500,000 = 70%. An all-cash purchase of the same asset is 0% LTV.
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