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In real estate investing, Loan-to-Value (LTV) is one of the most talked-about metrics-and for good reason. Whether you’re evaluating a fix and flip, considering a DSCR loan, or planning a refinance, your LTV will play a major role in how much you can borrow and what terms you’ll receive.
This episode from LFG Lending dives into how different lending products calculate LTV and how you, as an investor, can use this number strategically.
What Is Loan-to-Value (LTV)?
At its core, LTV is a simple ratio:
Loan Amount ÷ Property Value = Loan-to-Value (LTV)
For example, if you borrow $75,000 on a property valued at $100,000, your LTV is 75%.
But how lenders apply this formula depends heavily on the loan type-and that’s where things get more complex.
Fix & Flip Lending: LTV vs. LTC vs. ARV
When financing a fix and flip, lenders usually calculate your loan based on:
- Loan-to-Cost (LTC): The percentage of the purchase price + rehab costs that will be financed
- Loan-to-After-Repair Value (ARV): The percentage of the projected value after the rehab is complete
Example:
- Purchase price: $100,000
- Rehab budget: $50,000
- ARV: $200,000
Two options:
- 90% Loan-to-Cost: $150,000 x 90% = $135,000
- 70% of ARV: $200,000 x 70% = $140,000
Lenders will always use the lower of the two. In this case, you’d get a $135K loan, with $50K held for rehab, and you’d bring $15K to closing.
Some investors want the highest LTV possible. Why?
- Keeps more cash in their pocket
- Allows them to leverage more deals
- Ideal for fast growth
Others prefer lower LTVs for:
- Lower interest rates
- Better cash flow
- Less risk if the market shifts
“It all comes down to your risk tolerance and your long-term strategy.”
Is 100% Financing Coming Back?
Yes—in specific situations. Some private money lenders are now offering:
- 100% of purchase
- 100% of rehab
- Investor must still cover closing costs and show liquidity
These loans are perfect for experienced investors with strong deal flow who want to scale faster. But they’re not designed for first-timers with no reserves.
“If you don’t need the loan, you’re more likely to get the loan.”
LTV on DSCR Loans (Rental Properties)
When purchasing or refinancing a buy-and-hold property with a DSCR loan, LTV works differently:
Purchase:
- Up to 80% LTV
- You bring 20% down
Refinance:
There are two types of refis-and they affect your LTV:
1. Rate & Term Refinance
- No cash-out
- Used to refinance existing loan balance
- Up to 80% LTV
2. Cash-Out Refinance
- You receive funds at closing
- Typically capped at 75% LTV
Pro tip: Rate & term refis often come with better interest rates than cash-out.
“Sometimes getting that extra $3K at closing isn’t worth the higher rate.”
How to Think About LTV Strategically
LTV isn’t just about math—it’s about goals:
- Want to scale quickly? Maximize leverage with higher LTV
- Want lower payments or reduced risk? Choose a lower LTV
- Want to flip and cash out? Understand how ARV impacts your numbers
- Want to hold and cash flow? Structure your loan around rental income and DSCR
Need Help Navigating LTV for Your Next Deal?
At LFG Lending, we:
- Shop your deal across dozens of lenders
- Analyze both LTV and interest rate to find the best option
- Help you decide when to refi, flip, or hold
- Offer private money, hard money, DSCR, and commercial loan products
Book a Free Strategy Session and let us help you break down your deal-no calculator required.