The loan-to-value ratio (LTV) is the loan amount divided by the property's value, written as a percentage: LTV = loan amount ÷ property value × 100. On a purchase, lenders use the lower of the price and the appraised value. A $300,000 loan on a $400,000 house is a 75% LTV, the same thing as putting 25% down.
LTV is the main measure of a lender's risk, so it sets how much you can borrow, the rate you pay and, on a refinance, how much cash you can take out.
How do you calculate LTV?
- Find the value. On a purchase, it is the lower of the contract price and the appraised value. On a refinance, it is the new appraised value.
- Divide the loan amount by the value. Use the amount on the note, including any financed fees.
- Multiply by 100.
Turn it around to plan a purchase: the loan is the value times the LTV, and the down payment is the value times what is left. At 75% on $400,000, that is a $300,000 loan and a $100,000 down payment. Closing costs come on top; in the sample deal they are $12,000, so the cash to close is $112,000 before reserves. Investment property down payment covers where that money can come from.
LTV on the sample house, and a low appraisal
The example deal used across these guides is a $400,000 single-family house, set out in full in how to analyze a rental property. The figures are illustrations.
- As planned: $300,000 ÷ $400,000 = 75% LTV, with $100,000 down.
- If the appraisal comes in at $390,000: the lender now values the house at $390,000, the lower figure. The same $300,000 loan would be $300,000 ÷ $390,000 = 76.92% LTV, over a 75% limit. At 75% of $390,000 the most you can borrow is $292,500, so you would bring $107,500 instead of $100,000 (still paying $400,000), ask the seller to come down, or challenge the appraisal.
A rental property appraisal explains how the value is set and what to do when it comes in low.
What LTV can you get on an investment property?
Limits depend on the loan type, the purpose and your file. The ranges below are the usual ones across lenders, and they change.
| Loan | Purchase | Cash-out refinance |
|---|---|---|
| DSCR loan, long-term rental | Commonly up to 75% to 80%; 85% at a few lenders with top credit | Commonly 70% to 75%; 80% only at the top tier |
| DSCR loan, short-term rental | Often about 5 points lower than long-term | Often lower again |
| Conventional loan, one-unit investment property | Up to 85% under Fannie Mae's matrix | Up to 75% |
| Conventional loan, 2 to 4 unit investment property | Up to 75% | Lower than one unit |
On a DSCR loan, the box you land in on a lender's matrix depends on:
- Credit score: the top leverage often starts around 700 to 740.
- Coverage: a ratio of 1.25 opens more leverage than 1.00, and programs below 1.00 usually cap LTV lower.
- Experience: some programs offer first-time investors less leverage, or ask for more reserves instead.
- Property and use: condos, rural properties, two to four units and short-term rentals can each take leverage down a step.
- Loan size: very small and very large loans often carry lower limits.
DSCR loan requirements goes through each of these in detail.
How does LTV change your rate, payment and return?
Lenders price in LTV bands, usually five points wide, and the steps above 80% are typically the largest. Leverage also changes the payment the rent has to cover. Here is the sample house as a long-term rental at three LTVs, holding the example 7.5% rate constant for comparison (in practice the 80% loan would usually price a little higher):
| 70% LTV | 75% LTV | 80% LTV | |
|---|---|---|---|
| Loan | $280,000 | $300,000 | $320,000 |
| Down payment | $120,000 | $100,000 | $80,000 |
| Principal and interest a month | $1,957.80 | $2,097.64 | $2,237.49 |
| PITIA a month | $2,557.80 | $2,697.64 | $2,837.49 |
| DSCR on $3,000 of rent | 1.17 | 1.11 | 1.06 |
| Cash flow a year | ($2,829.60) | ($4,507.68) | ($6,185.88) |
| Cash-on-cash, with $12,000 of closing costs | (2.14%) | (4.02%) | (6.72%) |
More leverage means less cash in, but on this house it also means a lower coverage ratio and a bigger loss, because the loan costs more each year than the property earns on its price. Each column's monthly payment is worked out in PITIA.
LTV vs CLTV
CLTV, the combined loan-to-value ratio, adds every loan secured by the property: the first mortgage, the unpaid balance of any closed-end second loan and the drawn balance of a home equity line. Divide the total by the same value. If the sample house were bought with the $300,000 first loan plus a $20,000 second loan, the LTV would still be 75%, but the CLTV would be $320,000 ÷ $400,000 = 80%. A lender's limit applies to both.
HCLTV counts a home equity line at its full credit limit rather than what is drawn. Before you plan on a second loan behind an investor first mortgage, ask: lenders set their own rules on subordinate financing, and some do not allow it.
Cash-out refinance LTV
On a cash-out refinance, the LTV limit sets the new loan, and the new loan pays off the old one first.
A cash-out refinance on the sample house, two years on
After 24 payments, the sample loan's balance is $294,254.42. Suppose the house appraises at $440,000, an assumption for illustration, not a forecast.
- Current LTV: $294,254.42 ÷ $440,000 = 66.88%. Your equity is $145,745.58.
- At a 75% cash-out limit, the new loan can be $330,000. After paying off $294,254.42, that leaves $35,745.58 before closing costs.
- At a 70% limit, the new loan is $308,000 and the cash out is $13,745.58.
The bigger loan has a bigger payment. At the same example 7.5% rate, $330,000 costs $2,307.41 a month in principal and interest, so PITIA rises to $2,907.41 and the coverage ratio on $3,000 of rent falls to 1.03. The rent you can prove on the refinance date sets how much of that equity you can actually reach.
Two rules shape the timing. Most lenders want you to have owned the property for a while, commonly three to six months, before they lend on a new appraised value; before that, they size the loan on what you paid plus documented improvements. And if you bought with cash, a delayed financing refinance can return most of it soon after closing, capped at what you put in. DSCR cash-out refinance covers both.
How LTV moves while you own the property
Your LTV falls as you pay the loan down and as the value rises. The sample loan's first year of payments takes the balance to $297,234.56, which is 74.31% of the original $400,000 value. Paydown is slow in the early years of a 30-year loan, so most of the change in your LTV comes from the value, which can fall as well as rise. A higher LTV after a dip in prices can block a refinance just when you want one.
GoDoor's quick quote shows the LTV, the payment and the coverage ratio together, so you can see what another 5% down does to all three.
Mistakes to avoid
- Working out LTV on the list price when the appraisal may come in lower.
- Assuming the highest LTV on a lender's matrix fits your file. Credit, coverage, experience and short-term rental use each move you down a box.
- Budgeting only the down payment and forgetting closing costs and reserves.
- Planning a cash-out refinance on a new value before the lender's ownership period has passed.
- Counting only the first mortgage when a second loan or credit line also sits on the property.
Frequently asked questions
What is a good loan-to-value ratio for a rental property?
Lower is safer and usually cheaper. For investment purchases, 75% (25% down) is a common middle ground: most DSCR programs allow it, it avoids the pricing steps above 80%, and it leaves a cushion if values fall. Whether more or less leverage suits you depends on the deal: when a property earns less than the loan costs, more leverage lowers your return.
What is the maximum LTV for an investment property?
On DSCR loans, purchases commonly top out at 75% to 80%, with a few lenders reaching 85% for strong credit and coverage, and cash-out refinances at 70% to 75%. Fannie Mae's matrix allows up to 85% on a one-unit investment purchase and 75% on two to four units. Short-term rentals are often offered about 5 points less, and first-time investors sometimes less too.
How is LTV calculated on a refinance?
On a refinance, the value is the new appraised value, not what you paid. Divide the new loan amount by that appraisal. On a cash-out refinance, the new loan must first pay off the existing balance, so the cash you receive is the new loan minus the payoff and closing costs. Lenders may still cap the value at your cost if you have owned it only briefly.
What is the difference between LTV and CLTV?
LTV counts only the first mortgage. CLTV, the combined loan-to-value ratio, adds every loan secured by the property, such as a second mortgage or the drawn balance of a home equity line, and divides the total by the same value. A 75% first loan with a 5% second loan is a 75% LTV and an 80% CLTV.
Does a lower LTV get a better rate?
Usually, yes. Lenders price in LTV bands, so moving from 80% to 75%, or from 75% to 70%, typically lowers the rate or the points, and opens more programs. The size of each step varies by lender and changes with the market, so compare the saving with what the extra down payment could earn elsewhere.
Sources
- Fannie Mae Selling Guide, B2-1.2-01, Loan-to-Value (LTV) Ratios
- Fannie Mae Selling Guide, B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios
- Fannie Mae, Eligibility Matrix
- Consumer Financial Protection Bureau, What is a loan-to-value ratio and how does it relate to my costs?
- BiggerPockets forum, DSCR as a BRRRR exit: the terms investors are seeing
General education, not financial, tax or legal advice. Figures are examples: rates, rules and programs change, and every lender sets its own. Last checked November 4, 2026.