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Loan to Value

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Loan to Value

In real estate, Loan to Value (LTV) is the ratio of the outstanding loan balance to the value of the property expressed as a percentage. The higher the loan-to-value, the less likely the borrower will be able to repay the loan at maturity. Real estate lenders use this important metric, together with debt yield, debt service coverage ratio, among others to assess the risk of a loan and arrive at an appropriate loan amount.

Loan to Value (LTV) = Loan Amount ÷ Property Value

Related Content:
  • Introduction to Real Estate Debt
  • Case Summary - Financing the Foles
  • Financing the Foles Assignment
  • Levered Cash Flows and Returns
  • Loan Metrics and Sizing Real Estate Loans
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AdventuresinCRE.com (A.CRE) was started by Spencer Burton and Michael Belasco during their first year of graduate real estate studies at Cornell University. The site was initially meant to fill a need for readily available real estate financial modeling tools. Today, it is the web's preeminent real estate financial modeling, careers, and education resource.

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