LTV is the loan divided by the property’s value — the most familiar sizing test. Learn typical maximums, how it differs from LTC, and when it actually limits your loan.
Loan-to-value, or LTV, measures the size of a loan relative to the property’s value. It’s the most familiar of the three loan-sizing tests, and it caps how much a lender will advance against the asset’s worth.
A $6,500,000 loan on a property appraised at $10,000,000 is a 65% LTV. Flip the formula to find the maximum loan a value supports:
Typical maximum LTV
How high an LTV a lender will go depends on the asset, the lender, and the market. As a general guide for stabilized assets:
- Life companies: roughly 55%–65%
- Banks and CMBS: roughly 65%–75%
- Agency multifamily: up to 75%–80%
Higher-risk or transitional assets are held to lower LTVs; the strongest, most stable assets command the highest. The remaining percentage is the equity the borrower brings.
LTV vs. LTC: don’t mix them up
For a purchase or development, lenders also look at loan-to-cost (LTC) — the loan relative to total project cost rather than appraised value.
On a development that creates value, LTC and LTV can diverge sharply. A project that costs $6,000,000 but stabilizes at a $7,500,000 value might be 70% LTC ($4.2M) yet only 56% LTV at stabilization. Lenders frequently size to the lower of an LTC limit during construction and an LTV limit at stabilization.
When LTV is the binding constraint
LTV tends to limit the loan when a property trades at a low cap rate — high value relative to income. The value supports a large loan, but the income-based tests (DSCR and debt yield) cap proceeds below the LTV ceiling. In that case the loan is limited by income, not value, and a higher appraisal won’t help.
LTV bites hardest when values fall. If a property’s value drops at refinance, the maximum LTV-based loan drops with it, which can create a refinance gap even if income is steady. See how value drives loan proceeds and DSCR vs. debt yield vs. LTV.
How Mercury helps
We test LTV against DSCR and debt yield to show which one actually limits your loan — and structure the request around it — then run a competitive lender process where we’re licensed or exempt. Run your numbers in the Loan Sizing Calculator, then discuss your financing scenario.
Frequently asked questions
What is a good LTV for a commercial real estate loan?
Stabilized assets commonly finance at 55%–75% LTV depending on lender and property type, with agency multifamily reaching higher. Lower LTV means more borrower equity and less risk to the lender.
What’s the difference between LTV and LTC?
LTV compares the loan to the property’s value; LTC compares it to total project cost. For development deals, lenders often size to the lower of an LTC cap during construction and an LTV cap at stabilization.
Does a higher appraisal increase my loan?
Only if LTV is your binding constraint. If DSCR or debt yield limits the loan, a higher value doesn’t add proceeds.