In one sentence
The loan amount divided by the property's appraised value, the basic measure of how much equity cushions the lender.
The longer version
A 65% LTV loan on a $10M property is a $6.5M loan. Regulated lenders operate under supervisory LTV limits by property type, and credit policy usually sits below those caps. LTV pairs with DSCR and debt yield to size the loan; the binding constraint wins.
Value comes from the appraisal, which makes appraisal review part of the sizing conversation, not an afterthought.
Common questions
- How do you calculate loan to value?
- Divide the loan amount by the property's appraised value. A $7,000,000 loan on a $10,000,000 property is 70 percent LTV.
- What is a typical LTV for a commercial real estate loan?
- It varies by lender, property type and market. Stabilized commercial loans commonly fall somewhere in the 55 to 75 percent range, with lower limits on riskier property types.
- Why do lenders use LTV with DSCR and debt yield?
- Because LTV depends on an appraised value, which depends on a cap rate. Pairing it with income-based tests shows whether the loan is supported by both value and cash flow.
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