Quick answer
Loan-to-value (LTV) is the loan amount divided by the property’s value. On DSCR loans it is one of the most influential pricing factors: lower LTV means more of your own equity is at risk ahead of the lender’s, and wholesale lenders reward that with better pricing. Pricing usually changes in tiers, so small shifts near a tier boundary can matter.
How LTV is calculated
On a purchase, LTV is the loan amount divided by the lower of the purchase price or the appraised value. On a refinance it is the loan amount divided by the new appraised value. If you are buying below appraisal, the purchase price still usually governs the calculation for a purchase loan.
Why LTV is priced so heavily
Equity is the lender’s cushion. If an investor defaults and the property has to be sold, every dollar of the borrower’s equity absorbs loss before the lender’s capital does. DSCR loans lean on the property rather than the borrower’s personal income, so that cushion carries even more weight than it might on other loan types.
Wholesale lenders typically express this as an LTV grid: a set of bands, with a pricing adjustment for each band that combines with your credit score band and other features. The adjustment grows as leverage rises, and the steps near the top of the allowed range are usually the largest.
Using tiers to your advantage
Because pricing moves in steps, the useful question is not just “how much can I borrow?” but “where is the nearest tier boundary?” Bringing slightly more cash to closing, or taking slightly less on a cash-out, can drop you into a lower band. That improvement applies to the entire balance, not only the dollars you changed.
A smaller loan also lowers the payment, which raises your DSCR — a second pricing factor moving in your favor at the same time. Whenever we quote a scenario near a boundary, we show you the alternative.
LTV limits vs. LTV pricing
Two different things are happening on the grid. One is the maximum LTV a lender will allow at all for your credit, property type and purpose; the other is the price at each permitted LTV. Cash-out refinances, short-term rentals, condos and lower credit scores frequently have lower maximums. Knowing both helps you avoid designing a deal around leverage you cannot actually get.
Which way it moves your quote
| Change | Typical direction | Why |
|---|---|---|
| Lower LTV (more equity) | ▼ Tends to improve pricing | More borrower equity ahead of the lender. |
| Crossing down into a lower LTV band | ▼ Tends to improve pricing | Pricing improves on the whole balance. |
| Borrowing near the program maximum | ▲ Tends to cost more | The top bands carry the largest adjustments. |
| Cash-out at the same LTV as a purchase | ▲ Tends to cost more | Equity leaves the property. |
Directions describe general tendencies across wholesale lender pricing grids. Actual adjustments vary by lender and change with the market. DSCR Rates does not publish rates.
Questions about loan-to-value (ltv)
Is it always worth putting more money down?
Not always. The benefit is largest when extra cash moves you across a tier boundary. If it does not, the improvement may be small compared with what that cash could do elsewhere in your portfolio. We model both.
Does LTV use the appraisal or the purchase price?
For purchases, generally the lower of the two. For refinances, the new appraised value.