{"concept_id":"ALTSS-CREDIT-040","slug":"loan-to-value","canonical_name":"Loan-to-Value","acronym":"LTV","aliases":["LTV","loan to value ratio","LTV ratio"],"kind":"metric","authority":"industry","facets":["MET"],"domains":["PRIVATE-CREDIT","REAL-ESTATE"],"display_title":"Loan-to-Value (LTV)","search_aliases":["what is loan to value","ltv ratio meaning","how to calculate ltv","ltv commercial real estate","ltv vs ltc","loan to value private credit"],"disambiguation":"In venture capital and SaaS analysis, \"LTV\" usually means customer lifetime value (see LTV/CAC ratio), an unrelated metric.","one_sentence_definition":"Loan-to-value (LTV) is the ratio of a loan's outstanding balance to the value of the asset or collateral securing it, used to size loans and to measure the equity cushion that protects the lender if the asset's value falls.","plain_english":"If a property worth $100 million carries a $65 million mortgage, the LTV is 65%: the value can fall 35% before the loan is no longer fully covered. Lenders set a maximum LTV when they lend and watch it during the loan, because a lower LTV means a bigger cushion of owner's equity standing between the lender and a loss.","parent_concepts":["capital-stack"],"child_concepts":[],"related_concepts":["loan-to-cost","debt-yield","dscr-debt-service-coverage-ratio","cap-rate","real-estate-debt","nav-facility","asset-based-lending"],"comparison_concepts":[],"not_the_same_as":[{"slug":"loan-to-cost","distinction":"Loan-to-cost (LTC) divides the loan by total project cost. LTV divides it by appraised value, which for a development can be well above cost."},{"slug":"debt-yield","distinction":"Debt yield measures income relative to the loan and does not depend on valuation."},{"slug":"ltv-cac-ratio","distinction":"LTV/CAC compares customer lifetime value with acquisition cost. It has nothing to do with lending."}],"formula_ids":["F-CREDIT-040-loan-to-value"],"worked_examples":[{"title":"Illustrative commercial real estate loan at origination","paragraphs":["A lender advances $65m against an office building appraised at $100m. LTV is **65%**."],"calc":{"fn":"ltv","inputs":{"loan":65,"value":100},"expected":{"ltv":0.65},"tol":0.0005}},{"title":"The same loan after values fall","paragraphs":["Two years later the building is revalued at $85m. With no amortisation, LTV is **76.5%**. The equity cushion has shrunk from 35% to 23.5% of value, and the loan may no longer meet the lender's refinancing limit at maturity."],"calc":{"fn":"ltv","inputs":{"loan":65,"value":85},"expected":{"ltv":0.764706},"tol":0.0005}},{"title":"Corporate loan against enterprise value","paragraphs":["A sponsor buys a company for an enterprise value of $550m, financed with $275m of debt. Loan-to-value through the debt is **50%**: the sponsor's equity absorbs the first half of any fall in enterprise value."],"calc":{"fn":"ltv","inputs":{"loan":275,"value":550},"expected":{"ltv":0.5},"tol":0.0005}}],"sections":[{"heading":"Variants","paragraphs":["Common variants in market usage:","- **Combined or through-the-tranche LTV** includes all debt ranking ahead. A [mezzanine](/glossary/mezzanine-debt) loan that attaches at 60% and detaches at 75% has a 75% combined LTV, though it is itself only 15% of value.\n- **As-is vs as-stabilised vs as-complete**: for transitional and construction loans, the lender states which appraisal basis applies. Construction loans are usually sized on [loan-to-cost](/glossary/loan-to-cost).\n- **Corporate LTV**: debt over enterprise value, often the sponsor's purchase price. It measures the equity cushion in a buyout.\n- **Fund-finance LTV**: facility over eligible NAV in [NAV lending](/glossary/nav-facility).\n- **Advance rate**: in asset-based lending and [asset-based finance](/glossary/asset-based-finance), the maximum LTV applied to eligible collateral."]},{"heading":"How lenders use LTV","paragraphs":["- **Origination.** LTV caps the loan size, alongside [DSCR](/glossary/dscr-debt-service-coverage-ratio) and [debt yield](/glossary/debt-yield). The binding constraint sets the loan.\n- **Monitoring.** LTV is a common financial covenant in income-producing real estate loans, and in market practice NAV facilities and some balance-sheet loans also test it during the loan, with cash sweeps or defaults if it is breached.\n- **Pricing and attachment.** Higher-LTV tranches are priced higher, and the [capital stack](/glossary/capital-stack) is described by the LTV at which each tranche attaches and detaches."]},{"heading":"Why LTV is not enough on its own","paragraphs":["Value is an estimate. In real estate it depends on the [cap rate](/glossary/cap-rate) used: a lower cap rate raises value and lowers LTV with no change in the property's income. That is why lenders pair LTV with income-based tests. In private funds and private companies, value is a mark set by the owner or a model, so LTV inherits the reliability of the valuation."]}],"classification_rules":[],"calculation_rules":[],"common_mistakes":["Quoting an LTV without the value basis (appraisal type, purchase price or the lower of the two).","Reporting a junior tranche's own size as a share of value instead of its combined, through-the-tranche LTV.","Treating a low LTV as low risk when the value rests on a compressed cap rate or a stale mark."],"edge_cases":["Amortisation lowers LTV over time even if value is flat. Payment-in-kind (PIK) interest raises it.","Portfolio loans use an aggregate LTV, but release provisions can let the borrower sell the best assets first and leave a higher LTV on the rest."],"external_standard_mappings":[],"source_ids":["SRC-INTL-INREV-GDD","SRC-US-OCC-CH-CRE-2022"],"citations":[{"source_id":"SRC-US-OCC-CH-CRE-2022","pinpoint":"p. 26 (incl. n. 28); pp. 41, 43-44; glossary pp. 139-140","supports":"LTV divides the credit by the value of the property securing it, counting all senior liens; for a purchase loan, value is the lesser of acquisition cost and the appraised or evaluated value; LTV is one of several credit factors and a common financial covenant, used with DSCR and debt yield; value is NOI capitalised at a cap rate, and higher cap rates lower value with no change in the property; loan-to-cost divides the credit by total cost","source":{"source_id":"SRC-US-OCC-CH-CRE-2022","title":"Comptroller's Handbook: Commercial Real Estate Lending (Version 2.0)","publisher":"Office of the Comptroller of the Currency (OCC)","document_type":"supervisory handbook","url":"https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf","publication_date":"Version 2.0, March 2022","jurisdiction":"US","status":"current Comptroller's Handbook booklet","last_verified":"2026-10-01"}},{"source_id":"SRC-INTL-INREV-GDD","pinpoint":"D0670 Attachment Point LTV (INREV, 2020-02-26)","supports":"Tranches in a capital stack are described by the LTV at which the senior loan ends and the junior loan starts","source":{"source_id":"SRC-INTL-INREV-GDD","title":"Global Definitions Database (GDD)","publisher":"INREV (hosted); entries attributed to INREV, NCREIF or NCREIF PREA","document_type":"glossary","url":"https://www.inrev.org/definitions/EN/all","publication_date":"Per-entry versions and dates (entries opened 2026-10-01)","jurisdiction":"intl","status":"current","last_verified":"2026-10-01"}}],"faq":[],"seo":{},"first_published":null,"last_reviewed":"2026-10-01","last_modified":"2026-10-01","content_version":"2.0.0","url":"https://altss.com/glossary/loan-to-value","json_url":"https://altss.com/reference/concepts/loan-to-value.json","title":"Loan-to-Value (LTV)","formulas":[{"formula_id":"F-CREDIT-040-loan-to-value","concept_id":"ALTSS-CREDIT-040","label":"Loan-to-value","plain":"LTV = loan balance / value of the collateral","latex":"\\mathrm{LTV}=\\frac{L}{V}","variables":[{"symbol":"L","meaning":"outstanding loan balance; for combined LTV, all debt ranking ahead of and including the loan"},{"symbol":"V","meaning":"value of the collateral: appraised market value, purchase price, or the lower of the two, as the loan defines it"}],"convention_note":"State the value basis: as-is, as-stabilised or as-complete appraisal; purchase price; enterprise value; or fund NAV. Also say whether the loan figure covers only this tranche or the cumulative debt through it."}],"sources":[{"source_id":"SRC-INTL-INREV-GDD","title":"Global Definitions Database (GDD)","publisher":"INREV (hosted); entries attributed to INREV, NCREIF or NCREIF PREA","document_type":"glossary","url":"https://www.inrev.org/definitions/EN/all","publication_date":"Per-entry versions and dates (entries opened 2026-10-01)","jurisdiction":"intl","status":"current","last_verified":"2026-10-01"},{"source_id":"SRC-US-OCC-CH-CRE-2022","title":"Comptroller's Handbook: Commercial Real Estate Lending (Version 2.0)","publisher":"Office of the Comptroller of the Currency (OCC)","document_type":"supervisory handbook","url":"https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf","publication_date":"Version 2.0, March 2022","jurisdiction":"US","status":"current Comptroller's Handbook booklet","last_verified":"2026-10-01"}]}