What is a good LTV for rental property?

A good LTV for rental property is 60-75%. Below 60% means strong equity position and low risk. 75-80% is standard for new purchases. Above 80% may require PMI and represents higher risk exposure.

What happens if LTV is too high?

High LTV (above 80%) means you have little equity cushion. If property values drop, you could owe more than the property is worth (underwater). High LTV also typically means higher interest rates and may require private mortgage insurance (PMI).

Does LTV change over time?

Yes. LTV decreases as you make mortgage payments (reducing the loan balance) and as the property appreciates in value. LTV can increase if property values decline in your market.

Loan to Value Ratio (LTV) Explained

Understanding LTV — how much you owe versus how much your property is worth, and why lenders obsess over it.

Updated March 2026|By becvio Research

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What is LTV?

Loan to Value ratio (LTV) compares your mortgage balance to your property's current market value. It is expressed as a percentage. If you owe $150,000 on a property worth $200,000, your LTV is 75%. LTV tells you how much of the property the bank owns versus how much equity you have. Lenders use LTV as a primary risk indicator — the higher the LTV, the more risk they carry if you default.

How to Calculate LTV

The LTV formula is simple: LTV = (Current Loan Balance / Current Property Value) x 100. Note that LTV changes over time as you pay down the loan (balance decreases) and as the property appreciates or depreciates (value changes). A property purchased with 20% down starts at 80% LTV, but after 5 years of payments and appreciation, it might be at 60% LTV.

What LTV Do Lenders Require?

For investment properties, most conventional lenders require a maximum LTV of 75-80%, meaning you need 20-25% down. FHA loans for primary residences allow up to 96.5% LTV (3.5% down). VA loans allow 100% LTV (0% down) for eligible veterans. DSCR loans typically require 75-80% LTV. The lower your LTV, the better interest rate you typically receive.

Why LTV Matters for Investors

LTV directly affects your leverage, risk, and cash flow. Higher LTV means more leverage (amplifying both gains and losses) but also higher monthly payments and potentially PMI. Lower LTV means more equity cushion, lower payments, and better loan terms. Most experienced investors target 70-75% LTV on stabilized properties for a balance of leverage and safety.

LTV and Refinancing

LTV is critical when refinancing. Most cash-out refinance programs cap at 75% LTV for investment properties. If your property has appreciated or you have paid down significant principal, a lower LTV unlocks better refinance terms. In BRRRR investing, the goal is to refinance at 75% of the after-repair value, which ideally returns all your invested capital.

How to Improve LTV

You can improve (lower) your LTV two ways: increase the property value through renovations or market appreciation, or decrease the loan balance through regular payments or extra principal payments. Forced appreciation through rehab is the fastest way to improve LTV, which is the foundation of the BRRRR strategy.