Confirm the value
An appraisal or lender-approved valuation may differ from a purchase price or owner estimate.
GUIDE & CHECKLIST
Understanding Loan-to-Value
Loan-to-value divides the proposed loan by the property or asset value. A $1.5 million loan on a $2.5 million value equals 60% LTV.
Why this matters
Loan-to-value divides a loan amount by the accepted value of its collateral. A $1.5 million loan on a $2.5 million property value is 60% LTV. A lender may use a different lending value or include other secured debt.
Work through the details
Calculate the debt
Clarify whether senior and other liens are included in the lender’s calculation.
Plan for equity
Closing costs, improvements and reserves can require cash beyond the difference between price and loan proceeds.
Preparation checklist
- Use the lender’s accepted appraisal or valuation
- Include all debt secured by the asset when required
- Check whether purchase price limits the lending value
- Allow for closing costs and any required equity
Questions that can slow a request
Lower appraisal
A value below expectations can reduce proceeds or increase required equity.
Hidden capital need
A borrower can meet a target LTV and still lack funds for closing or renovation.
How Alliance helps
A lower appraisal or unexpected equity requirement can disrupt a property plan. Alliance tests loan proceeds against the purchase, improvements, and closing costs, then examines valuation assumptions with you. You see the potential cash gap before relying on a proposed loan amount.
Related financing needs
Commercial Real Estate
A property opportunity or approaching maturity brings deadlines you cannot ignore. Explore financing for commercial property purchases, refinancing, improvements, and investment plans.
Explore ↗Construction
Your project needs financing aligned with its budget, schedule, and completion plan. Address construction funding requirements early so avoidable financing issues do not hold up the work.
Explore ↗Keep learning
Understanding Debt Yield ↗Commercial Real Estate Financing Checklist ↗How commercial financing works ↗
Educational guidance only. Requirements and calculations depend on the lender, program and transaction; this is not an approval or a lender-specific checklist.
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Alliance can help identify the questions and documents that matter for your situation.