Commercial mortgage underwriting
Loan-to-Value (LTV)
LTV compares the amount of debt with the property value used by the lender for the financing decision.
Basic formula
LTV = loan amount ÷ lender-accepted property value
Educational definitionNo universal lender threshold is implied.
Why it matters in commercial financing
LTV describes leverage against value, but it does not measure cash flow. A transaction can look reasonable on LTV and still have insufficient debt-service coverage—or the reverse.
Important cautions
- The lender may use an appraisal or another accepted value basis.
- Purchase price and appraised value are not always the same.
- Maximum leverage varies by asset, lender and transaction.
- LTV should be reviewed with cash-flow metrics.
Discuss a real transaction
Move from the metric to the property and financing objective.
Worked LTV example
An illustrative $1,800,000 loan against a lender-accepted value of $3,000,000 has 60% LTV. If the lender accepts a value of $2,700,000 instead, the same debt represents approximately 66.7% LTV. This is why a purchase price or owner’s estimate cannot be substituted automatically for the value used in the financing commitment.
Further reading
Content reviewed September 9, 2026. These resources provide background; individual lender requirements and property circumstances differ. Illustrative calculations are examples, not financing offers.