LTV (Loan-to-Value)

LTV is the loan amount divided by the value of the asset securing it. It measures how much of the collateral’s value is financed with debt, and therefore how much cushion the lender has if the borrower defaults.

Formula

LTV = Loan Amount / Asset Value

For real estate, asset value usually comes from an appraisal or from a cap rate applied to NOI. A lower LTV means more borrower equity ahead of the loan and a thicker margin of safety.

Why it matters

LTV sets the equity cushion, but it is only as good as the value in the denominator. An aggressive cap rate inflates value and flatters LTV, which is why underwriters pair it with debt yield, a measure that does not depend on valuation.

How vishwa.ai calculates LTV

vishwa.ai carries the value it derives from NOI and your underwriting cap rate, or from the appraisal on file, and reports LTV next to DSCR and debt yield so the leverage picture is complete, with each input linked to its source.

See also: cap rate, debt yield, DSCR.