Commercial Real Estate LTV Calculator

How LTV Works in Commercial Lending

The formula is straightforward:

LTV = Loan Amount / Property Value

A $6 million loan on an $8 million property is 75% LTV. The remaining 25% represents the borrower's equity, whether that comes from a cash down payment, existing equity from a refinance, or a combination of sources.

Lenders set maximum LTV thresholds because equity is their first line of defense. If a borrower defaults and the lender forecloses, the property needs to sell for at least the loan amount to make the lender whole. Lower LTV means more cushion between the loan balance and the property's worth.

Maximum LTV by Loan Type

Every loan program has its own LTV ceiling. These are typical ranges; individual lender policies, property type, market, and borrower strength all affect the actual maximum.

Loan Type	Typical Max LTV	Notes
CMBS	65% - 75%	75% is the general ceiling; stronger properties in gateway markets may reach it
Fannie Mae / Freddie Mac	75% - 80%	Multifamily only. Affordable housing properties may qualify for higher LTV
HUD/FHA 223(f)	Up to 85%	Multifamily refinance; long timeline but highest non-SBA leverage
HUD/FHA 221(d)(4)	Up to 87%	Multifamily new construction/substantial rehab
SBA 504	Up to 90%	Owner-occupied only; 10% down payment (15% for new businesses or special-use)
Bank / Credit Union	65% - 75%	Varies widely. Full recourse may allow higher LTV at some institutions
Bridge Loans	65% - 80%	Based on as-is value; some bridge lenders also look at LTC (loan-to-cost)
Life Company	55% - 65%	Most conservative; compensated by the best rates and terms in the market
Hard Money	60% - 75%	Higher rates but faster close; LTV may be based on ARV for value-add

LTV vs. LTC: Which One Applies?

For stabilized property acquisitions and refinances, lenders use LTV based on the appraised value or purchase price. For value-add, renovation, or construction deals, lenders typically look at LTC (loan-to-cost), which compares the loan to the total project budget.

Here's where it gets important: a property purchased for $5 million with $2 million in planned renovations has a total cost of $7 million. If the lender offers 75% LTC, that's a $5.25 million loan. But if the property only appraises at $5 million today, the LTV on the current value is 105%, which no lender would do. That's why value-add and construction deals use LTC as the primary sizing metric, often with a supplementary LTV check on the projected stabilized value (sometimes called LTARV, loan-to-after-repair-value).

How LTV Affects Your Loan Terms

LTV doesn't just determine how much you can borrow. It influences almost every aspect of the loan:

Factor	Lower LTV (under 65%)	Higher LTV (70-80%)
Interest Rate	Better pricing (lower spread)	Higher spread to compensate for risk
Recourse	Non-recourse more readily available	May require partial or full recourse
Reserves	Lower or waived reserve requirements	Larger escrow/reserve deposits
Prepayment	More flexibility in prepayment terms	Stricter prepayment provisions
Approval Speed	Faster, less scrutiny	More due diligence, potentially slower close

LTV in the Three-Metric Underwriting Framework

Commercial loans are typically sized to the most restrictive of three tests: DSCR, debt yield, and LTV. The loan amount that satisfies all three constraints wins.

Example: a $10 million property with $750,000 NOI and a 6.5% interest rate.

Metric	Minimum Requirement	Max Loan Amount
LTV (75% max)	75%	$7,500,000
DSCR (1.25x min, 25-yr amort)	1.25x	~$7,200,000
Debt Yield (10% min)	10%	$7,500,000

In this case, DSCR is the binding constraint at roughly $7.2 million. The lender quotes $7.2 million even though LTV and debt yield would support $7.5 million. This is a common scenario in higher-rate environments where debt service payments eat into coverage.

Common LTV Scenarios

Property Value	Loan Amount	LTV	Context
$10,000,000	$7,500,000	75%	Standard CMBS or agency deal
$5,000,000	$4,500,000	90%	SBA 504 (owner-occupied)
$20,000,000	$12,000,000	60%	Conservative life company placement
$8,000,000	$5,600,000	70%	Bank loan with partial recourse

How to Get Higher LTV

If your deal needs more leverage than a single lender will provide, there are structural options:

SBA 504 structure: For owner-occupied commercial properties, SBA 504 loans split the financing between a bank first mortgage (50%), a CDC/SBA debenture (40%), and borrower equity (10%). This effectively delivers 90% combined LTV.

Mezzanine financing: A second-position loan behind the senior mortgage. If the senior lender provides 65% LTV and the mezzanine lender adds 15%, total leverage reaches 80% LTV. The borrower only needs 20% equity. Mezzanine debt is more expensive than senior, typically 10-15%+ depending on risk.

Preferred equity: Similar to mezzanine but structured as an equity investment rather than debt. It sits below the senior loan in the capital stack and doesn't trigger loan agreement restrictions that prohibit additional debt.

Higher appraisal: LTV is based on appraised value. A higher appraisal means lower LTV at the same loan amount. While you can't control the appraisal, providing thorough comparable sales data and property documentation to the appraiser helps ensure an accurate valuation.