LTV Guide
Understand loan-to-value, equity contribution and how property value affects a financing structure.
What Is LTV?
Loan-to-value (LTV) compares the amount borrowed with the value of the asset securing the loan: LTV = loan amount ÷ asset value. A lower LTV means more owner equity and generally less risk to the funding source. Maximum LTV varies by asset type, borrower, purpose and funding source.
Formula
LTV = loan amount ÷ property value.
Equity
Lower LTV generally means more borrower equity in the property.
Valuation
Underwriting may rely on an approved appraisal or other acceptable valuation.
Structure
Maximum leverage depends on property, borrower and financing source.
Illustrative LTV Examples
For purchases, funding sources often rely on the lower of the purchase price or an appraised value. For refinances, they rely on an appraised or otherwise acceptable valuation.
Common LTV Mistakes
- Using an estimated value instead of an appraised or contract value
- Ignoring second liens when measuring combined LTV
- Forgetting closing costs and reserves when planning equity
- Assuming the same maximum LTV applies to every property type
LTV FAQs
What LTV can I get?
It depends on the property type, the borrower, the purpose of the loan and the funding source. CMCC cannot quote a maximum before reviewing the facts.
What is combined LTV?
Combined LTV adds all loans secured by the property, such as a first and a second lien, and compares the total with the property's value.
Is LTV the only thing funding sources look at?
No. Cash flow, borrower strength and the purpose of funds matter as well. See the DSCR guide.
Have a real scenario?
Use the guide to organize the question, then let CMCC review the facts.
Related CMCC Tools & Financing Paths
Use the resource to understand the issue, then move to the relevant calculator, financing path or application when the scenario is ready.