What Is Loan-to-Value (LTV)?

LoantoValue (LTV) is the ratio of the loan amount to the appraised value of the property. Formula: LTV = Loan Amount ÷ Appraised Value A lender offering 70% LTV on a property appraised at $3,000,000 will lend up to $2,100,000.

Loan-to-Value (LTV) is the ratio of the loan amount to the appraised value of the property.

Formula: LTV = Loan Amount ÷ Appraised Value

A lender offering 70% LTV on a property appraised at $3,000,000 will lend up to $2,100,000. The buyer must cover the remaining $900,000 — the equity (or down payment). Typical LTV ranges in CRE:

• Multifamily (Agency — Fannie/Freddie): up to 80% LTV
• Conventional bank loans: 65–75% LTV
• Bridge loans (value-add): 65–75% LTV of as-is value; sometimes 80–85% of cost
• SBA 504 loans (owner-occupied): up to 90% LTV

Higher LTV means less equity required — which magnifies returns if the deal works, and magnifies losses if it doesn’t. A 65% LTV loan on a $2,000,000 property requires $700,000 equity; an 80% LTV loan requires only $400,000. That extra $300,000 can fund a second deal — or become a problem if property values drop and the loan balance exceeds the new appraised value (being “underwater”).

LTV is determined by the appraiser’s value, not the purchase price. If you pay $3,200,000 for a property appraised at $2,900,000, the lender calculates LTV against $2,900,000. The gap is your problem. This is why paying above appraised value on a leveraged deal requires extra equity coverage.

Learn this properly

LTV is one of the core numbers in commercial real estate. The Language of CRE course teaches it alongside every other metric you need to read a deal, with worked examples and practice questions.

[Start with The Language of CRE ($49)](/courses/f2/) · [Open the CRE calculators](/cre-calculators/)

Common questions

What is Loan-to-Value (LTV)?

LoantoValue (LTV) is the ratio of the loan amount to the appraised value of the property. Formula: LTV = Loan Amount ÷ Appraised Value A lender offering 70% LTV on a property appraised at $3,000,000 will lend up to $2,100,000.

Why does LTV matter in a commercial real estate deal?

The buyer must cover the remaining $900,000 — the equity (or down payment). Typical LTV ranges in CRE: Multifamily (Agency — Fannie/Freddie): up to 80% LTV Conventional bank loans: 65–75% LTV Bridge loans (valueadd): 65–75% LTV of asis value; sometimes 80–85% of cost SBA 504 loans (owneroccupied): up to 90% LTV Higher LTV means less equity required — which magnifies returns if the deal works, and magnifies losses if it doesn’t.

Related terms

[Net Operating Income (NOI)](/net-operating-income/) · [Operating Expense Ratio (OER)](/operating-expense-ratio/)

Educational definition only. Not investment, financial, or brokerage advice.