Loan to value is one of the two ratios that decide how big a loan you can get, and this free calculator gives it to you instantly. Enter the loan amount and the property value, and you have your LTV.
LTV tells the lender how much of the property their money is covering, which is really a measure of their risk and your equity. The lower the LTV, the more skin you have in the game and the safer the loan. Here is the tool, then how lenders use it.
LTV, in one line: loan to value is the loan amount divided by the property value, shown as a percentage. A $1,500,000 loan on a $2,000,000 property is 75% LTV.
What lenders allow: many commercial loans cap out around 70% to 80% LTV, though the loan is often further limited by the debt service coverage the property can support.
The Loan to Value Formula
The formula is LTV = loan amount ÷ property value. A $1,500,000 loan on a $2,000,000 property is a 75% LTV, which means you are putting 25% down as equity. Lenders set a maximum LTV by property type and risk, and that ceiling is one of the limits on your loan size.
Remember that LTV is only one of two constraints. Even if a lender allows 75% LTV, they will also size the loan so the payment keeps your debt coverage above their minimum, and whichever limit is lower wins. On many income properties today, debt coverage is the binding constraint, not LTV.
How LTV Affects Your Deal
A lower LTV means more equity, a smaller loan, easier approval, and often a better rate, but it also ties up more of your cash. A higher LTV stretches your cash further but raises your payment and your risk. Finding the right balance is part of structuring the deal, and it interacts with the debt service coverage ratio and your rate. I get into what is actually negotiable on a commercial loan here.
Watch: How To Finance Your First Commercial Property
LTV Calculator FAQ
How do you calculate loan to value?
Divide the loan amount by the property value. A $1,500,000 loan on a $2,000,000 property is a 75% LTV.
What is a good LTV for commercial real estate?
Many commercial loans fall in the 70% to 80% LTV range. A lower LTV means more equity and less risk, and often better loan terms.
Is LTV or DSCR more important?
Both matter, and lenders apply whichever produces the smaller loan. On income-producing property, debt service coverage is often the binding constraint rather than LTV.
Does a lower LTV get a better rate?
Often, yes. A lower LTV means less risk for the lender because you have more equity in the deal, which can translate into more favorable terms.
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Explore CRE CentralPair LTV with the DSCR calculator and the commercial mortgage calculator to size your loan, or see all the commercial calculators.