Calculator
LTV Calculator: Loan-to-Value and Loan-to-Cost
Loan-to-value (LTV) is the loan amount divided by the appraised value of the collateral. A $700,000 loan on a $1,000,000 property is 70% LTV. Loan-to-cost (LTC) divides the loan by total project cost instead, which matters for construction and value-add deals.
Formula
How underwriters use it
LTV measures how much value protects the lender if it has to sell the collateral. Lenders typically cap LTV based on asset risk and loan program.
On construction and heavy value-add deals, lenders often apply both an LTC limit on day-one cost and an LTV limit on stabilized value, and the lower loan wins.
Frequently asked questions
What is a good LTV for commercial real estate?
Conventional commercial lenders commonly cap LTV around 65% to 75%, agency multifamily lenders can go higher, and riskier assets or bridge loans may be lower. Equity investors generally prefer lower leverage because it reduces the chance of a forced sale.
What is the difference between LTV and LTC?
LTV uses appraised value, LTC uses total cost to acquire or build. On a value-add deal, value may exceed cost after improvements, so a loan can be a modest LTV but a high LTC.
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