FINANCING

Understanding LTV: Why Your Lender Cares More Than You Think

Updated March 2026

What LTV Is

Loan-to-value = loan balance divided by property value. A \$150K loan on a \$200K property = 75% LTV. Simple math, massive implications. LTV is the first thing a lender looks at because it determines their risk. At 75% LTV, they have a 25% equity cushion — even if property values drop 20%, the loan is still covered. At 95% LTV, a 5% price drop puts the loan underwater.

How LTV Affects Your Terms

Every 5% reduction in LTV unlocks better terms. At 80% LTV: no PMI required, standard rates. At 75%: better rates, more lender options, DSCR loans become available. At 70%: best rates, easiest approval. At 60%: some lenders offer their absolute best pricing. The difference between 80% and 70% LTV on a \$200K property is \$20K more down payment — but saves you 0.25-0.5% on interest rate, which is \$50-100/month for 30 years.

LTV for Refinancing

When you refinance, LTV determines how much cash you can pull out. Most cash-out refinances cap at 75% LTV for investment properties. If your property is worth \$150K and you owe \$80K, you can refinance up to \$112,500 — pulling out \$32,500 in cash. This is the 'Refinance' in BRRRR. But if your property hasn't appreciated enough, you can't pull enough out to recover your investment.

Monitoring LTV Over Time

Your LTV improves every month as you pay down principal and (hopefully) as the property appreciates. Track it. When LTV drops below 75%, you're in refinance territory. When it drops below 60%, consider whether that equity is working hard enough — you might pull some out via HELOC or cash-out refi and deploy it into another property.