LTV (Loan-to-Value Ratio)

Category: finance

A financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

LTV is the "down payment metric." If you buy a $10M building with an $8M loan, your LTV is 80%. Commercial lenders usually cap LTV at 65% to 75%, requiring the buyer to bring substantial "skin in the game" to protect the bank from a market downturn.

Common Examples

• The strict commercial lender required a maximum Loan-to-Value ratio of 65% before they would approve the warehouse acquisition.
• During periods of economic uncertainty, banks lower their LTV limits, forcing developers to find more private equity to close their deals.