What is Loan-to-Value Ratio (LTV)?
Loan-to-value ratio (LTV) is the loan amount divided by the property's appraised value, expressed as a percentage. LTV drives lender pricing, down payment requirements, and PMI thresholds. Lower LTV = lower risk to lender = better rates and terms.
Standard LTV limits: 80% on a conventional primary residence (or higher with PMI), 75% on an investment property purchase, 70-75% on an investment refi, 65-70% on a cash-out investment refi. Hard money lenders typically go to 70-75% of after-repair-value (different denominator).
For BRRRR investors, the refi LTV ceiling is the key constraint. A property with $200,000 ARV refinanced at 75% LTV produces $150,000 in proceeds — that has to be enough to repay the purchase + rehab + carry. If it isn't, the investor leaves equity in the deal.
Combined LTV (CLTV) adds any second-position loans (HELOCs, junior liens) to the first mortgage. Lenders cap CLTV the same way they cap LTV — usually within a few percentage points.
Concepts that connect.
Debt Service Coverage Ratio (DSCR) is the ratio of a property's annual net operating income to its annual debt service. A DSCR of 1.20 means the property generates 20% more income than it needs to cover the loan payment. Most DSCR lenders require 1.10-1.25 to underwrite.
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat — a real-estate investing strategy where an investor buys a distressed property cheap, renovates it, rents it out, refinances at the improved appraisal to recover most or all of the original capital, then repeats the process with the recovered capital.
A cash-out refinance is a mortgage refinance for more than the existing loan balance, with the difference paid to the borrower in cash. Used by BRRRR investors to recover capital after stabilizing a rental property, by long-term holders to access appreciated equity.
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