Loan-to-Value Ratio (LTV)

LTV: What the Market Actually Requires

LTV looks like the simplest ratio in the stack, but it is really an appraisal bet. The lender's maximum is applied to appraised value, and on acquisitions most term sheets read 'the lesser of purchase price or appraised value,' so a low appraisal cuts proceeds even when your basis is sound. Sophisticated borrowers treat the appraisal as a managed process: order it early, feed the appraiser the rent roll, comps, and the capital improvements story, and be ready with a documented rebuttal if the value misses.

Maximums are remarkably consistent by lender type. Life insurance companies are the most conservative, typically 50% to 65% LTV, in exchange for the sharpest pricing and longest terms. Banks generally lend 65% to 75%. CMBS tops out around 70% to 75% depending on market and asset. Agency lenders go to 80% on market-rate multifamily and effectively higher on affordable deals. Bridge lenders and debt funds quote 65% to 75% of as-is value with future funding on top, and often think in loan-to-cost terms instead. Owner-user deals through SBA programs can reach 85% to 90%, a separate world from investor underwriting.

The strategic question is whether LTV is even your binding constraint. In low cap-rate markets, debt yield and DSCR usually cap proceeds well before 75% LTV, which makes chasing a high-LTV lender pointless. In higher cap-rate markets, LTV genuinely binds, and the fight is over the appraisal. When the senior loan stops short of your leverage target, mezzanine debt or preferred equity fills the gap above the first mortgage rather than forcing the senior lender past its ceiling. The most common borrower mistakes: assuming the appraisal will match the purchase price, ignoring the lesser-of language, and comparing LTV quotes without asking which value definition, as-is, as-complete, or as-stabilized, the lender is using.

Why It Matters for Your Loan

LTV sets the equity check. At a 65% maximum on a $10,000,000 deal you write $3,500,000 plus costs; at 75% the check drops by $1,000,000, which changes your returns, your investor raise, and sometimes whether the deal happens at all. It also drives pricing, since most lenders tier spreads by leverage band. Commercial Lending Solutions runs every deal against LTV, DSCR, and debt yield simultaneously to identify which lenders can actually deliver the leverage they quote.