Real Estate Investing Glossary

Loan-to-Value Ratio (LTV)

Last reviewed July 15, 2026

LTV is the loan amount divided by a property’s value, expressing how much of the asset is financed versus owned as equity.

What is the loan-to-value ratio?

Loan-to-value (LTV) is the percentage of a property’s value that is borrowed. Buy a $200,000 property with a $150,000 loan and you are at 75% LTV, with the remaining 25% as your equity. Lenders use LTV as their primary collateral-risk gauge: the lower the LTV, the more cushion they have if they ever need to foreclose and sell.

Maximum LTVs vary by loan type. Conventional loans on primary residences go up to 97% LTV (with mortgage insurance), while investment-property loans typically max out at 75% to 80%. Cash-out refinances on rentals usually cap around 70% to 75%, and hard money lenders often lend 65% to 75% of value, or a percentage of ARV on flips.

For investors, LTV is the leverage dial. Higher LTV means less cash in and larger percentage gains when things go well, but thinner cash flow (bigger payments) and a smaller buffer against price declines. Dropping below 80% LTV on a conventional loan also eliminates private mortgage insurance, an immediate return on the extra equity.

Formula

LTV = loan amount ÷ property value (appraised value or purchase price) × 100

Worked example

You buy a rental for $240,000 with a $60,000 down payment and a $180,000 loan. LTV = $180,000 ÷ $240,000 = 75%, a typical maximum for investment-property financing.

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Frequently asked questions

What LTV can I get on an investment property?: Conventional loans on single-family investment properties typically allow up to 80% LTV on a purchase (85% is rare and pricey), and 70% to 75% on a cash-out refinance. Two-to-four-unit properties and DSCR loans often cap lower. Compare that with up to 97% LTV available on primary residences, house hacking exploits exactly this gap.
Is a lower LTV always better?: Lower LTV means safer: smaller payments, better rates, more cushion against price drops. But it also means more cash locked in one asset earning only the property’s unleveraged return. Many investors target moderate leverage, around 65% to 75% LTV, as the balance point where cash flow stays healthy while equity still compounds through amortization and appreciation.

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What is the loan-to-value ratio?

Frequently asked questions

What LTV can I get on an investment property?

Conventional loans on single-family investment properties typically allow up to 80% LTV on a purchase (85% is rare and pricey), and 70% to 75% on a cash-out refinance. Two-to-four-unit properties and DSCR loans often cap lower. Compare that with up to 97% LTV available on primary residences, house hacking exploits exactly this gap.

Is a lower LTV always better?

Lower LTV means safer: smaller payments, better rates, more cushion against price drops. But it also means more cash locked in one asset earning only the property’s unleveraged return. Many investors target moderate leverage, around 65% to 75% LTV, as the balance point where cash flow stays healthy while equity still compounds through amortization and appreciation.