Loan-to-Value (LTV): How Lenders Measure Your Equity Cushion

Loan-to-value (LTV) is your loan amount divided by the property's value, shown as a percentage. It tells a lender how much equity sits between the loan and the property's worth. Lower LTV means a bigger cushion and usually better terms.

The formula

LTV = loan amount ÷ property value

Example: You borrow $195,000 against a property valued at $300,000. Divide $195,000 by $300,000 and you get 65% LTV. Your equity, the other 35%, is $105,000.

Flip it around to find a maximum loan: if a lender caps you at 70% LTV on a $300,000 property, the most you can borrow is $210,000.

Which "value" counts

This trips people up. On a purchase, many lenders use whichever is lower: the price you pay or the appraised value. If you're paying $280,000 for a house that appraises at $300,000, the lender may calculate LTV on $280,000.

On a refinance, there's no purchase price, so the appraised value generally applies. Some lenders also require you to have owned the property for a period before they'll lend on a new, higher value.

For renovation loans, lenders often add separate limits tied to project cost and after-repair value (ARV). LTV on its own describes the property as it stands today.

At RSC Private Lending, Bridge loans go up to 85% LTV on a purchase, and DSCR Rental loans go up to 80% on a purchase. Both go up to 80% on a rate/term refinance and 75% on a cash-out refinance.

Why LTV matters to you

• It sets your cash need. The higher the LTV allowed, the less cash you bring.
• It shapes pricing. Lower LTV often means better rates or fewer conditions.
• It shows your risk too. High LTV leaves little room if values drop, which makes it harder to sell or refinance for enough to pay off the loan.

Private lenders seldom go to 100%, because that leaves the lender with no buffer at all.

LTV changes over time

Your LTV isn't fixed. Pay down principal or raise the value through renovation and it falls. A market decline pushes it up. That's why a property bought at 70% LTV and renovated well can refinance easily a few months later, while one bought at a high LTV in a soft market may struggle.

What this means for you

Know your LTV before you call a lender. Run it on the purchase price and on the expected appraisal, then check how much cash each scenario requires. It's the fastest way to tell if a deal fits your budget.

Want to know how your deal's LTV looks to a lender? Send the numbers to RSC Private Lending for a term sheet in 24 hours. Subject to underwriting.