Loan-to-Value Ratio (LTV)

Loan-to-value ratio compares what you borrow with what the appraiser says the property is worth, as a percent. On a BRRRR refinance it is the number everything hinges on: the lender advances a fixed percentage of after-repair value, typically 70 to 75%, and that percentage times the appraisal is the cash available to pay off the short-term loan and return your investment.

Each 5% of LTV on a $500,000 appraisal is $25,000 of cash out. The difference between a 70% and a 75% refinance is often the difference between recovering everything and leaving $25,000 in the deal. Some DSCR lenders reach 80% with a strong ratio and credit.

LTV also works backwards into the purchase price. For the refinance to return all your cash, total project cost has to be at or below LTV times ARV, less refinance costs. At 75% and 3% costs, that is about 72.75% of ARV. Every point of LTV the lender offers is a point more you can pay for the property.

LTV is the loan amount divided by the appraised value, written as a percent. A $375,000 loan on a $500,000 appraisal is 75% LTV. Run it backwards to size a refinance: multiply the appraised value by the lender's maximum LTV, and that figure is the largest loan on offer.

$500,000 ARV at 75% LTV is $375,000 of loan, and each 5% of LTV on that appraisal moves the cash out by $25,000. Fannie Mae caps a one-unit investment property cash-out refinance at 75% LTV, so 75% is the usual ceiling outside DSCR lending.