How commercial LTV is worked out
LTV is the loan divided by the value of the property, as a percentage. Lenders use the appraised value, and for a purchase the lower of the actual acquisition cost and the estimated market value. Combined LTV (CLTV) adds any other loans secured on the property, such as a second lien, to the loan before dividing by the value.
The largest loan a limit allows is the appraised value times the maximum LTV. If the limit counts every lien on the property, the other liens come off that figure first. Use the setting under the limit to choose whether your lender counts this loan alone or all liens.
Worked example: a $975,000 loan on a $1,500,000 property
A $975,000 loan on a property appraised at $1,500,000 is 65.00% LTV. With a $150,000 second lien the CLTV is 75.00%, and the equity after both loans is $375,000, which is 25.00% of the value.
Against a lender whose limit is 75%, the loan is within the limit and $150,000 below it, and the largest loan is $1,125,000. If the 75% limit counted both liens, the largest loan would be $975,000, which is where the loan already stands, so there would be no room left. A $1,200,000 loan on the same property would be 80.00% LTV, $75,000 over the 75% limit. At the $1,125,000 largest loan, you would need $225,000 of equity after the second lien.
If you are buying: loan to cost
For a purchase, enter the price and the closing and other costs on top of it. A $1,425,000 price with $60,000 of costs is $1,485,000 in all, so the $975,000 loan is 65.66% of the cost and 68.42% of the price. You would need $510,000 for the down payment and costs. At the largest loan of $1,125,000 you would need $360,000. If you are refinancing, enter zero for the price and these purchase figures are left out. A $900,000 loan on the same property is then 60.00% LTV and 70.00% CLTV.
If the value falls
Enter a fall in value to test the loan. With a 15% fall the property is worth $1,275,000, so the LTV rises from 65.00% to 76.47% and the CLTV from 75.00% to 88.24%. The value can fall by 13.33% before the 75% limit is reached, and $18,750 would have to be paid down to meet the limit at the lower value.
Federal supervisory LTV limits
US banks are subject to interagency guidelines on real estate lending. They say a bank's own LTV limits should not exceed supervisory limits of 85% for improved property, 80% for commercial, multifamily and other nonresidential construction, 75% for land development and 65% for raw land. The guidelines include all senior liens in the LTV and, for a purchase, use the lower of the actual acquisition cost and the estimated market value. These are ceilings for a bank's own policy, not what any lender offers, so use your lender's own figure.
What this calculator leaves out
Lenders also look at the income the property earns, the borrower and the type of property, and many lend the lower of what the LTV and the income allow. The limit you enter is your assumption, not a lender's published figure. This is a general commercial LTV calculation. Bridge lenders measure LTV on the gross loan and on the net cash advanced, which is covered by the bridge loan LTV calculator.
For a bridge loan on the gross and net bases, use the bridge loan LTV calculator .
To test whether the income covers the loan payments, use the DSCR commercial loan calculator .
Use the right country page
This page stays in US dollars and uses US terms: appraised value, CLTV, liens and down payment. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the UK commercial loan LTV calculation, which uses valuation and second charges. The inputs reset and amounts are not converted.
Inputs for the US commercial loan LTV calculator
Appraised value
The lender's appraised value, or the price if that is lower.
Loan amount
The commercial real estate loan you want, or the balance you owe.
Second lien or other loans
Other loans secured on the property, such as a junior lien. Enter zero for none.
Lender's maximum LTV
The most the lender will lend against the value. The 75% shown is an illustration; use your lender's figure.
The limit applies to
This loan alone, or every lien on the property together (CLTV).
Purchase price (if buying)
What you are paying for the property. Enter zero if you are not buying.
Closing and other costs
Costs of buying on top of the price. Used with a purchase price.
Fall in value to test
How far the value could drop. We show the LTV after it.
CALCULATOR QUESTIONS
US commercial loan LTV calculation questions
How do I calculate LTV on a commercial property?
Divide the loan by the appraised value and multiply by 100. $975,000 on $1,500,000 is 65.00%.
What is a typical maximum LTV for commercial real estate?
Each lender sets its own and it varies with the property type and the borrower. Federal supervisory limits cap a bank's own limit at 85% for improved property. Enter your lender's figure; the 75% shown is only an illustration.
What is CLTV?
Combined loan to value: the loan plus any other liens on the property, divided by the value. $975,000 and a $150,000 second lien on $1,500,000 is 75.00%.
How much can I borrow at a given LTV?
Multiply the appraised value by the LTV limit. At 75% on $1,500,000 the largest loan is $1,125,000, or $975,000 if the limit counts the $150,000 second lien too.
What is the difference between LTV and loan to cost?
LTV compares the loan with the value. Loan to cost compares it with the price plus the costs of buying. $975,000 against $1,485,000 of cost is 65.66%.
How far can the value fall before I breach the limit?
Enter a fall in value and read the LTV after it. With the figures above the value can fall by 13.33% before the 75% limit is reached.
What happens when I change country?
The United Kingdom option opens the separate UK commercial loan LTV calculation, in pounds, with valuation and second charges. Your inputs are reset rather than converted.