What is LTV: Loan To Value Ratio?

An LTV Ratio, or loan-to-value ratio, is a value (expressed as a percentage) that is used quite often in commercial mortgage finance and multifamily property financing to determine the ratio of a particular debt (like a first mortgage) relative to the value of the collateral (such as a multifamily or other commercial property in this case). So, for example, if a borrower owns a property worth $10 million and is looking to refinance the first mortgage for $8 million, the LTV is 80%.

Lenders utilize this figure to determine their level of risk as well as the borrower leverage in a transaction. The rule is the lower the LTV, the lower the risk. This formula is used primarily in the case of standard acquisitions and refinances. In the cases of multifamily property rehabilitation or ground-up construction, other factors like LTC (loan-to-cost) become more important factors.

LTV Calculator

The Formula for LTV (Loan to Value Ratio) is:

LTV = Loan Amount / Total Value