Loan-to-Value Ratio (LTV) in Relation to CMBS Loans

LTV Ratios and CMBS Financing

Loan-to-value ratio, or LTV, is one of the most important metrics that lenders use to determine whether a borrower can qualify for a CMBS loan. LTV can be determined by dividing the amount of the loan by the assessed value of the property. For example, if a borrower wants to take out a loan for $2.5 million, and the property they’re buying is worth $3 million, the potential loan would have an LTV of:

$2.5 million/$3 million = 0.83, or 83% LTV

Since most CMBS loans permit a maximum LTV of 75%, the borrower in the example above would probably not qualify for CMBS financing.