If you're exploring financing for your next real estate deal, you’ve likely come across the term LTV—short for Loan-to-Value ratio.
It’s one of the most important metrics lenders use to determine how much they’re willing to finance and how risky your loan appears. Whether you're using a DSCR loan, conventional mortgage, or hard money, your LTV can make or break a deal.
In this guide, we’ll explain what LTV is, how it’s calculated, why it matters for investors, and how to leverage it strategically to grow your portfolio.
What Is LTV?
LTV (Loan-to-Value) is a ratio that compares the amount of the loan you’re requesting to the total value of the property. It tells lenders how much equity you (the borrower) have in the deal.
🧮 LTV Formula:
LTV = Loan Amount ÷ Property Value
Example:
If you’re buying a $400,000 property with a $300,000 loan:
- LTV = $300,000 ÷ $400,000 = 75%
That means you’re putting down 25%, and the lender is financing 75% of the purchase.
