What Is Loan-to-Value Ratio?
LTV is the number that controls how much money a lender will give you — and it's the number that determines how much capital you get back on a BRRRR refinance. At 75% LTV on a $200,000 appraisal, you get a $150,000 loan. At 80% LTV, you get $160,000. That 5% difference is $10,000 in capital recovery. Lower LTV means more equity (safer for the lender, better rates for you) but less leverage. Higher LTV means more leverage but higher risk. For BRRRR investors, the magic number is 75% — that's where most DSCR cash-out refinances land, and it's the LTV that makes or breaks your capital recycling math.
The ratio of a loan amount to a property's appraised value, expressed as a percentage — a 75% LTV on a $200,000 property means a $150,000 loan and $50,000 in equity.
At a Glance
- LTV = Loan Amount / Appraised Value × 100 — tells you how leveraged the property is
- 75% LTV is the standard for BRRRR cash-out refinancing (DSCR loans)
- 80% LTV is available for purchases and rate-and-term refinances on single-family
- Hard money lenders underwrite at 65-75% LTV against ARV
- Lower LTV = more equity retained = better rates and easier approval
- The gap between LTV and 100% is your equity — the lender's safety cushion and your wealth position
LTV = (Loan Amount / Property Value) × 100
How It Works
LTV tells both you and the lender how much of the property's value is financed versus how much you own outright. It's the simplest risk metric in lending.
For purchases: If you buy a $200,000 property with $50,000 down, your loan is $150,000. LTV = $150,000 / $200,000 = 75%. You own 25% of the property's value. The lender owns the other 75% in the form of a mortgage lien.
For refinances: This is where LTV gets interesting for investors. On a cash-out refinance, the lender appraises the property at its current (post-renovation) value and lends you a percentage of that. At 75% LTV on a $200,000 appraisal, you get a $150,000 loan. If your existing mortgage balance is $100,000, you pocket $50,000 in cash — that's the "cash-out" portion.
Why lenders care about LTV: Lower LTV means more equity cushion. If you default, the lender forecloses and sells the property. At 75% LTV, they can sell for 25% below appraised value and still recover their money. At 95% LTV, a 10% market dip puts the lender underwater. That's why investment property LTVs are capped lower than primary residence LTVs — lenders see higher risk.
LTV by loan type in 2026:
- DSCR cash-out refinance: 70-75% LTV (standard for BRRRR)
- DSCR purchase: 75-80% LTV
- Conventional investment purchase: 75-80% LTV (25% minimum down)
- Hard money (acquisition): 65-75% LTV against ARV
- FHA primary residence: up to 96.5% LTV (3.5% down — not for investments)
The BRRRR math. In BRRRR, LTV directly controls capital recovery. You buy for $90,000, rehab for $40,000 (all-in: $130,000), and the property appraises at $175,000. At 75% LTV, your refinance loan is $131,250. That covers your all-in cost plus $1,250 — you've recovered essentially all your capital. At 70% LTV, the loan is $122,500 — you leave $7,500 in the deal. That 5% LTV difference is the difference between full capital recovery and partial.
Real-World Example
You're evaluating two DSCR refinance scenarios on a Memphis duplex. Post-rehab appraisal: $210,000. All-in cost: $152,000 ($108,000 purchase + $44,000 rehab).
Scenario A — 75% LTV lender: Loan amount: $210,000 × 0.75 = $157,500. Capital recovered: $157,500. Capital left in deal: $0 (you actually get $5,500 back after paying off the hard money balance). Rate: 7.25%.
Scenario B — 70% LTV lender: Loan amount: $210,000 × 0.70 = $147,000. Capital recovered: $147,000. Capital left in deal: $5,000 trapped in the property. Rate: 7.0% (lower rate for lower LTV).
Scenario A recovers all your capital but costs more monthly in debt service. Scenario B leaves $5,000 in the deal but gives you a lower payment. Over a 30-year hold: Scenario B saves $9,800 in total interest. But Scenario A frees that $5,000 for the next deal.
Neither is objectively better. The right answer depends on whether you value capital velocity (get the money back fast for the next deal) or long-term cost efficiency.
Pros & Cons
- Directly determines how much capital you recover on a BRRRR refinance — the core metric for capital recycling
- Lower LTV gets you better interest rates and easier approval — lenders reward your equity position
- Understanding LTV helps you compare loan products (DSCR vs. conventional vs. hard money) on equal terms
- Forces discipline: if your deal doesn't clear 75% LTV on realistic ARV, it doesn't work
- Creates a built-in equity cushion — at 75% LTV, the market can drop 25% before you're underwater
- Investment property LTV caps are lower than primary residence — you need more skin in the game
- LTV depends entirely on the appraisal, which you don't control — a low appraisal kills your refinance math
- Higher LTV (more leverage) amplifies both gains and losses — small market shifts have outsized impact on equity
- Cash-out LTV caps (70-75%) may not return all your capital on deals with thin margins
- LTV restrictions vary by lender and change quarterly — what one lender caps at 75% another may cap at 70%
Watch Out
The biggest LTV trap in BRRRR: assuming you'll get 75% LTV when some lenders only offer 70%. That 5% gap on a $200,000 appraisal is $10,000 less capital recovered. Line up your refinance lender before you close on the purchase — know their LTV cap, seasoning requirements, and DSCR minimums upfront.
The appraisal controls everything. Your ARV estimate might be $200,000, but if the appraiser comes in at $185,000, your 75% LTV loan drops from $150,000 to $138,750. That's $11,250 less capital recovered — money trapped in the deal. This is why conservative ARV estimation matters so much: your refinance loan is capped by whoever the appraiser is and what comps they pull, not by your projections.
Don't chase maximum LTV if the property barely cash-flows. A 80% LTV loan on a property that only produces a 1.05x DSCR is risky — one month of vacancy and you're subsidizing the debt from your personal cash. Higher LTV means higher payments, which means tighter cash flow. Sometimes, accepting a lower LTV (and leaving capital in the deal) is the smarter move.
Ask an Investor
The Takeaway
LTV is the lever that controls your capital recycling speed in BRRRR and your equity position on every rental. Target 75% LTV on DSCR cash-out refinances — that's the standard that most lenders offer and the number that makes BRRRR capital recovery math work. Always know your lender's LTV cap before you buy, estimate ARV conservatively (because the appraisal determines your actual loan amount), and don't over-leverage just to pull more cash out. The 25% equity you keep at 75% LTV is your protection against market dips and your proof to the next lender that you're a disciplined borrower.