Full Definition
Loan-to-Value ratio is calculated as Loan Amount / Appraised Property Value. It represents the lender's exposure as a percentage of the asset value. Higher LTV = higher leverage = higher risk for both borrower and lender. Commercial real estate LTV typically ranges 65-75% for stabilized properties and 65-75% LTC for construction.
Example
A $1.5M loan on a $2M property represents 75% LTV. The borrower's $500K equity is the 25% buffer.
Related Terms
LTC (Loan-to-Cost)
Construction loan amount as a percentage of total project cost. Typical LTC ranges 65-80%.
DSCR (Debt Service Coverage Ratio)
Ratio of NOI to annual debt service. Lenders require 1.20x-1.30x+ typical for commercial loans.
Debt Yield
NOI divided by total loan amount. A lender metric measuring loan safety independent of interest rate.