LTV (Loan-to-Value)
The ratio of your loan amount to the property's value.
Definition
LTV expresses the loan amount as a percentage of the property's appraised value or purchase price (whichever is lower). It's a key factor lenders use to assess risk.
Examples
- 80% LTV = 20% down payment
- 75% LTV = 25% down payment
- 70% LTV = 30% down payment
Why LTV Matters
- Higher LTV = more leverage but higher payments and potentially PMI
- Lower LTV = more equity and better loan terms
- Investment properties typically require 20-25% down (75-80% LTV)
LTV in BRRRR
Cash-out refinances typically allow 70-80% LTV. If you create enough equity through renovation, you can pull out most or all of your initial investment.