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What is a loan-to-value ratio?
Updated over 7 months ago

A loan-to-value ratio (LTV) is the percentage of a property's worth that is being financed through a loan. To calculate this ratio, divide the loan amount by the appraised value of the property. For instance, if you need a commercial mortgage of $500,000 on a property worth $1 million, your LTV will be 50%.

A lower LTV implies lower risk for lenders and may translate to more favorable loan terms, such as lower interest rates. Lenders usually set a specific maximum LTV ratio before approving a commercial mortgage. However, note that other factors like credit score, business financials, and down payment also affect the terms of a commercial mortgage.

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