Commercial Mortgage Quick Reference Guide
LTV: Loan To Value Ratio
LTV stands for loan-to-value ratio. This ratio is used in commercial mortgage finance and multifamily property financing to determine the ratio of a particular debt (perhaps a first mortgage) relative to the value of the collateral (in this case a multifamily or other commercial property). If a borrower owns a property worth $10 million, and is looking to refinance a first mortgage for $7 million, the LTV is 70%. Lenders use this figure to determine their level of risk and borrower leverage in a transaction. The lower the LTV, the lower the risk. This formula is used in the case of standard purchases and refinances. In the cases of multifamily property rehabilitation, or ground-up construction, other factors like LTC become important factors.
The formula is for LTV (the loan to value ratio) is:
LTV = Loan Amount / Total Value