How to use the LTV calculator
Enter what the property is worth today and what you owe against it, then set the LTV a lender would allow. The calculator handles the rest.
- Property value: the current market or appraised value. For an apartment building, lenders usually set this from NOI and the market cap rate, not from what you paid.
- First loan balance: the current principal on your first mortgage, not the original loan amount.
- Second loan / other liens: any second mortgage, line of credit, supplemental loan, seller-carry note or other debt recorded against the property. Enter 0 if there is none.
- Target maximum LTV (%): the highest LTV a lender will accept for the loan you want, such as 75% or 80%.
What the results mean
The calculator returns five numbers:
- LTV: the first loan balance divided by the property value, as a percentage.
- Combined LTV (CLTV): all loans and liens added together, divided by the value.
- Equity: the value minus every loan and lien. This is your ownership stake before selling costs.
- Maximum loan at the target LTV: the value times the target LTV, which is the ceiling on total debt a lender would allow on value alone.
- Cash-out available at the target LTV: the maximum loan minus everything you already owe, before closing costs and prepayment fees. If the result is negative, you are above the target LTV and would need to pay debt down to refinance at that level.
What is the loan to value formula?
The loan to value formula is LTV = loan balance ÷ property value × 100. A $1,800,000 loan on a $3,000,000 building is a 60% LTV. The lower the number, the more equity stands between the lender and a loss.
Combined LTV uses the same math but adds every loan secured by the property, so CLTV = (first loan + second loan + other liens) ÷ value × 100. A first lender watches CLTV because a second or third lien adds to the owner’s total debt and can put pressure on the owner. Every result moves with the value you enter, so if the appraisal comes in lower, all five numbers change with it.
| Result | Formula |
|---|---|
| LTV | First loan balance ÷ property value × 100 |
| Combined LTV (CLTV) | (First loan + second loan + other liens) ÷ property value × 100 |
| Equity | Property value − all loans and liens |
| Maximum loan at target LTV | Property value × target LTV |
| Cash-out available | Maximum loan − (first loan + second loan + other liens) |
Worked example: a $3,000,000 apartment building
With the default inputs, an owner has a building worth $3,000,000, a first loan of $1,800,000, no second loan and a 75% target LTV. The LTV is $1,800,000 ÷ $3,000,000 = 60%, and with no other liens the combined LTV is also 60%.
Equity is $3,000,000 − $1,800,000 = $1,200,000. At 75%, the maximum loan is $3,000,000 × 0.75 = $2,250,000, so the cash-out available is $2,250,000 − $1,800,000 = $450,000 before closing costs, reserves and any prepayment penalty on the old loan.
| Line | Amount |
|---|---|
| Property value | $3,000,000 |
| First loan balance | $1,800,000 |
| Second loan / other liens | $0 |
| LTV | 60% |
| Combined LTV | 60% |
| Equity | $1,200,000 |
| Maximum loan at 75% LTV | $2,250,000 |
| Cash-out available at 75% LTV | $450,000 |
How do lenders use LTV with DSCR and debt yield on apartment loans?
On an apartment loan, LTV is only one of the tests, and the lender lends the smallest amount that passes all of them. The DSCR test asks whether NOI covers the mortgage payments with room to spare. Debt yield is NOI divided by the loan amount, and it ignores the rate and amortization completely.
Here’s how that plays out on the same $3,000,000 building. Say the NOI is $180,000, which is a 6% cap rate, and the loan is priced at 6.5% on a 30-year amortization. A $2,250,000 loan at 75% LTV would cost $14,221.53 a month, or $170,658 a year, for a DSCR of only about 1.05x. At a 1.25x DSCR, the most the property supports is about $1,898,530, which is roughly a 63.3% LTV. The debt yield at that size is about 9.5%, compared with 8.0% at $2,250,000.
So the cash-out this calculator gives you is a ceiling based on value only. When rates are high, DSCR usually dictates the actual loan amount, and our DSCR calculator and commercial mortgage calculator show that limit.
What are the maximum LTVs on Fannie Mae and Freddie Mac apartment loans?
Agency loans on stabilized apartment buildings top out around 80% LTV with a 1.25x minimum DSCR, and the term and payment type can lower that limit. Fannie Mae’s conventional multifamily term sheet lists a maximum LTV of 80% and a minimum DSCR of 1.25x. Freddie Mac’s fixed-rate and small balance term sheets set the limit by term, as shown below.
Those are program ceilings, not what every deal gets. Lenders adjust for the market, the property’s condition and the borrower, and both agencies say their terms can change.
| Program (per published term sheet) | Maximum LTV | Minimum DSCR |
|---|---|---|
| Fannie Mae conventional multifamily | 80% | 1.25x |
| Freddie Mac fixed-rate or small balance, amortizing, 5- to under 7-year term | 75% | 1.25x |
| Freddie Mac fixed-rate or small balance, amortizing, 7-year term or longer | 80% | 1.25x |
| Freddie Mac fixed-rate or small balance, full-term interest-only | 65% to 70%, depending on term | 1.25x |
LTV when you refinance vs when you sell
LTV limits how much new debt you can raise in a refinance, but it puts no limit on a sale. When you sell, your equity turns into cash at closing once the loans, selling costs and taxes are paid. That’s why a refinance can tap only part of your equity while a sale recovers all of it.
In the example above, a 75% refinance frees up at most $450,000 of the $1,200,000 in equity, and you keep the building, the new payment and the risk. A sale at $3,000,000 would pay off the $1,800,000 loan and leave $1,200,000 before transaction costs, prepayment fees, capital gains tax and depreciation recapture. A 1031 exchange can defer that tax if you buy a replacement property.
A refinance isn’t a taxable event, which is a clear benefit. But it adds debt, and the property still has to pass the lender’s DSCR test at today’s rates before you see any cash.
How does a seller-financed note affect the buyer’s LTV?
A seller-financed note takes a junior position behind the buyer’s bank loan, so the first-mortgage LTV doesn’t change but the combined LTV goes up. The buyer’s senior lender will weigh both numbers before it agrees to a second lien.
Say you sell for $3,000,000, the buyer puts down $750,000, a bank lends $1,950,000 and you carry a $300,000 note. The bank’s LTV is $1,950,000 ÷ $3,000,000 = 65%, and the CLTV is $2,250,000 ÷ $3,000,000 = 75%. Many senior lenders restrict or prohibit secondary financing, and Fannie Mae and Freddie Mac offer their own supplemental loans, so check the buyer’s loan terms before you agree to carry paper.
For you as the seller, CLTV is the risk measure. At 75%, the building would have to lose more than 25% of its value before your note is under water. Our seller financing calculator shows the payments and the interest you’d earn on that note.
How LTV works on a 5+ unit apartment building
On a 5+ unit building, the value in the LTV formula comes from the income, so LTV moves with NOI and cap rates even when nothing about the building changes. If the market cap rate rises from 6% to 7%, the value of a building with $180,000 of NOI drops from $3,000,000 to about $2,571,429, and the same $1,800,000 loan jumps from 60% to 70% LTV.
That’s why a refinance appraisal can surprise an owner who hasn’t checked the numbers in a few years. Before you apply, update the rent roll, run your NOI and test a conservative value in the calculator. Our cap rate calculator and apartment building value calculator can help you set that value.
Repairs can shrink the proceeds too. If the lender’s property condition report calls for roof work, deferred maintenance or unit turns, expect part of the loan to be held back in a repair escrow, which lowers the cash you actually walk away with.
Equity locked up and the refinance doesn’t work? You can sell instead
If the LTV and DSCR tests leave you with too little cash-out, or a balloon is coming due on a loan you can’t refinance, a sale can convert all of your equity to cash at once. Skyline Capital Investments buys apartment buildings with 5+ units nationwide as a direct buyer.
We can consider seller financing on part of the price and can work with 1031 exchange timelines if you plan to trade into another property. Send the address and unit count through the form on this page or call (469) 660-2977, and we typically respond within 48 hours.
