Loan-to-Value (LTV) Ratio: What It Is and How It's Used

The loan-to-value (LTV) ratio is a metric to measure the financial risk of a loan. It compares the amount of money borrowed to the market or appraised value of the asset used as collateral for the loan. A higher loan-to-value ratio denotes more risk, often requiring the borrower to pay a higher interest rate or obtain insurance on the loan.

Loading paragraph...

Balance beam with sacks of cash on one side and a home on the other. — Image Source: Getty Images

Loading image...

Loading paragraph...

Loading pitch...

Loading paragraph...

Foreclosure

Foreclosure is when the owner of the mortgage has taken the property it secures to repay the debt that’s owed against it.

Loading definition...

For a HELOC or home equity loan, lenders usually require that the CLTV be 85% or less. That means the combined value of the existing mortgage and additional borrowing, e.g., a HELOC or home equity loan, can be at most 85% of the home's current appraised value.

In commercial real estate investing, LTV ratios for senior debt on a property investment typically range between 65% to 80% depending on the property type. Lenders are usually willing to offer loans at LTVs in the 70% to 80% range for multifamily investments, with an average of around 73%. Meanwhile, LTVs are often below 70% for office, industrial, and self-storage deals, typically averaging around 68%.

Related investing topics

Loading paragraph...

What Is a Good Return on Investment?

You invest to get a return. So what makes a good ROI?

Average Stock Market Return

Stock market results can vary wildly from year to year.

9 Top Dividend Stocks for December 2025

These companies pay their shareholders regularly, making them good sources of income.

What Is the Nasdaq Composite Index?

Once you understand how the Nasdaq Composite Index works, you can learn to use this index to help guide you in creating wealth.

Loading hub_pages...

Loading paragraph...

Loading pitch...

About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

TMFmd19

@MatthewDiLallo

The Motley Fool has a disclosure policy.