Loan-to-value (LTV) is the loan amount divided by the property's value, expressed as a percentage — a $29.9 million loan against a $46 million appraisal is 65% LTV. It's the lender's leverage cap: the higher the LTV, the thinner the equity cushion protecting the lender if values fall.
Why LTV Matters in CRE
Every point of LTV shifts risk from borrower to lender, so lenders cap it by asset type and appetite. Stabilized multifamily typically sees maximums around 65–75% from banks and agency lenders; office and retail often cap closer to 55–65%; bridge and debt-fund lenders stretch higher and price for it. Leverage also drives pricing — a loan at 55% LTV usually earns a tighter spread than the same deal at 70%.
A one-line cousin: loan-to-cost (LTC) divides the loan by total project cost instead of value, and it's the sizing lens for construction and heavy value-add deals where stabilized value is still a projection.
Where LTV Meets DSCR: The Lesser-Of Rule
LTV rarely sizes a loan alone. Lenders run it alongside a minimum DSCR and lend the lesser of the two answers. When rates are low, the LTV cap usually binds; when rates rise, the income test starts producing the smaller number — and borrowers discover the "65% loan" on the term sheet is really something closer to 57%.
A Worked Example
A borrower asks for maximum proceeds on a stabilized asset:
- Appraised value: $46,000,000
- LTV cap: 65% — maximum loan $29,900,000
- NOI: $2,530,000 · DSCR minimum: 1.25x
- Max annual debt service: $2,530,000 ÷ 1.25 = $2,024,000
- Loan that payment supports (≈6.6% rate, 30-year amortization): ≈ $26,400,000
- Sized loan: $26.4M — an effective 57% LTV
The LTV headline said $29.9 million; the DSCR test said $26.4 million; the lender funds $26.4 million. The borrower now needs roughly $3.5 million more equity than the LTV math suggested — which is why experienced teams solve for the maximum loan under both constraints on day one, instead of discovering the gap at application.
How Teams Handle Loan Sizing Today
Usually with a side calculation in the deal spreadsheet — one that quietly goes stale when the rate quote moves. With Playgrounds, you describe the constraints and get an underwriting model that solves for the maximum loan under both LTV and DSCR limits, updating as quotes and NOI change.
Frequently Asked Questions
What is a typical LTV for commercial real estate?
Most stabilized deals land between 55% and 75%. Multifamily with agency or bank debt typically sees the higher end; office and retail sit lower; bridge lenders stretch further at a higher price. Individual lenders set their own caps, so treat these as ranges rather than rules.
What's the difference between LTV and LTC?
LTV divides the loan by the property's appraised value; LTC divides it by total project cost. LTC governs construction and value-add deals, where cost is known but stabilized value is still a projection. Some lenders test both and apply the lower result.
Why did my loan come in below the stated maximum LTV?
Almost always the DSCR test. Lenders size to the lesser of the LTV cap and the loan the property's income can support at the required coverage. When rates are high, the income test typically produces the smaller loan.
Does a lower LTV get a better interest rate?
Typically, yes. Many lenders price in leverage tiers — a loan at 55% LTV commonly earns a tighter spread than the same deal at 70%, because the equity cushion below the debt is larger.
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