What is Loan-to-Value (LTV)?
Loan-to-value (LTV) is the ratio of the mortgage amount to the property's appraised value or purchase price (whichever is lower), expressed as a percentage. If you purchase a $300,000 property with a $240,000 mortgage, your LTV is 80%. LTV is one of the primary risk metrics lenders use to evaluate mortgage applications and determine terms.
Higher LTV means more leverage and less borrower equity, which represents higher risk to the lender. This is why loans with LTV above 80% typically require mortgage insurance, and why investment property loans have lower maximum LTV limits than owner-occupied loans.
LTV requirements by loan type
| Loan Type | Max LTV (Owner-Occ) | Max LTV (Investment) |
|---|---|---|
| Conventional | 97% | 75-80% |
| FHA | 96.5% | N/A (owner-occ only) |
| VA | 100% | N/A (owner-occ only) |
| Hard Money | N/A | 65-75% |
| Cash-Out Refi | 80% | 70-75% |
Combined LTV (CLTV)
When a property has multiple liens (first mortgage plus HELOC or home equity loan), lenders calculate the combined LTV: total of all liens divided by property value. Most lenders cap CLTV at 80-90%. CLTV matters when adding a second lien or evaluating total exposure on a property with existing debt.
LTV and investor strategy
Understanding LTV helps investors optimize leverage. Lower LTV means lower rates and better terms but more capital tied up. Higher LTV preserves capital for other deals but costs more. For BRRRR investors, the post-rehab LTV on the cash-out refinance determines how much capital you can recycle. Maximizing ARV through renovation directly increases the amount you can borrow at any given LTV limit.