What is LTV and how is it calculated on a land loan?

Question

Turnrow Capital · Accepted Answer

Loan-to-value (LTV) is your loan amount divided by the property's appraised value. A $700,000 loan on land appraised at $1,000,000 is 70% LTV. On purchases, lenders — Turnrow included — use the lesser of purchase price or appraisal, so a bargain purchase does not automatically unlock a bigger loan.

LTV is the single most important number in asset-based land lending. It sets your maximum loan, drives your rate, and defines the lender's cushion if things go wrong. At 70% LTV, the market would need to fall more than 30% before the lender's collateral position is impaired — that margin is what makes fast, low-documentation lending possible.

On a refinance, LTV runs off the current appraised value alone. On a purchase, the lesser-of rule applies: buy a $1,000,000 parcel for $850,000 and the loan is calculated against $850,000, not the appraisal. The logic is simple — the market just told the lender what the property trades for.

Know your target LTV before you apply anywhere. If you need 85% of purchase price financed, no legitimate land lender will get you there on the land alone; you will need additional collateral, a seller carryback, or more cash down.