LTV (Loan-to-Value)
Quick Answer
The ratio of the loan amount to the appraised value of the property, expressed as a percentage.
Definition
Loan-to-Value (LTV) is the ratio of a loan's total amount to the appraised value of the property. In fix-and-flip lending, LTV is typically calculated against the ARV (After Repair Value) rather than the current as-is value. A loan of $240,000 on a property with an ARV of $350,000 represents an LTV of approximately 68.5%. Lenders use LTV as a key risk control — limiting exposure relative to what the property will be worth when complete.
Why It Matters for Flippers
LTV determines whether there is enough equity cushion in the deal to protect the lender in a default scenario. From a borrower perspective, lower LTV means more of your own equity in the deal — which often unlocks better rates. The LTV test also prevents borrowers from using flip loans to chase speculative ARVs without sufficient margin.
Example in a Flip Deal
ARV: $400,000. At 75% LTV, the maximum loan is $300,000. If total project costs (purchase + rehab) are $310,000, the LTV test limits the loan to $300,000, and the borrower must bring $10,000 additional equity to cover the gap.
Related Terms
LTC (Loan-to-Cost)
The ratio of the total loan amount to the total project cost (purchase price + rehab budget).
ARV (After Repair Value)
The estimated market value of a property after all planned renovations are complete.
Fix and Flip Loan
A short-term real estate loan designed for investors who buy, renovate, and resell properties for profit.
As-Is Value
The current market value of a property in its existing condition, before any renovations.