December 11, 2024•2 min read
Loan-to-Value (LTV) Ratio: How Much Can You Borrow?
RentalIntel Team
Real Estate Investment Experts
How much money can you borrow for a property?
The Loan-to-Value (LTV) Ratio tells lenders how much risk they’re taking on.
The Formula
Where:
- Loan Amount = Mortgage balance
- Property Value = Appraised or purchase price
Real-Life Example
Your Mortgage Details
| Category | Amount |
|---|---|
| Property Value | $300,000 |
| Loan Amount | $240,000 |
LTV Ratio Calculation
What Does an 80% LTV Mean?
- Lower LTV (below 80%) = Easier loan approval, better interest rates.
- Higher LTV (above 80%) = Riskier, might require private mortgage insurance (PMI).
When LTV Matters (and When It Doesn’t)
✅ Used by lenders to assess risk
✅ Affects mortgage rates & loan approval
❌ Doesn’t factor in cash flow or expenses
❌ Can change over time as property appreciates
Pro Tips
- Keep LTV under 75% for best financing terms.
- Consider lower LTV for investment properties to reduce risk.
- Use home equity growth to refinance and lower LTV over time.
The Bottom Line
A low LTV means better financing options.
If your LTV is too high, you might be over-leveraged.
What’s your target LTV when financing properties? Let’s discuss!
