Loan to Value Ratio (LTV)
The ratio of your outstanding mortgage balance to the current value of the property, expressed as a percentage.
Definition
LTV is one of the first numbers a lender looks at when you apply for a refinance or a new loan. It tells them how much skin you have in the game. An 80% LTV means you owe $80,000 on a property worth $100,000 and you have $20,000 of equity. Lenders use LTV thresholds to price loans and approve or deny applications. Conventional investment property refinances usually cap at 75% LTV. DSCR loans typically cap at 75 to 80%. Cash out refinances cap at 70 to 75% LTV for investment properties. Below 70% LTV gets you the best rates. Above 80% means you are probably not eligible for any investment property loan at all. LTV also moves over time as you pay down principal and as the property appreciates, so tracking it across your portfolio lets you spot refinance opportunities before the lender does.
Formula
Example
You owe $145,000 on a property currently appraised at $200,000. LTV = 145,000 / 200,000 = 72.5%. That is eligible for most cash out refinances.
Frequently asked
What is a good LTV for a rental property?
Under 75% gives you refinance flexibility. Under 65% unlocks the best interest rates.
What is the maximum LTV for a cash out refinance?
Most investment property cash out refis cap at 70 to 75% LTV.
How does LTV change over time?
Your LTV drops as you pay down principal and as the property appreciates. This creates refinance opportunities.
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