Determining LTV: A Broker’s Guide to Maximizing Real Estate Financing

Loan-to-Value (LTV) is perhaps the most important consideration in private lending, and as a mortgage broker, private lender, or referral partner, it is vital to understand how it affects financing decisions. Whether you're putting deals together for clients or seeking to grow your lending relationships, a solid understanding of LTV allows you to provide competitive financing terms while effectively managing risk.

At RCN Capital we value transparency, and we collaborate with our wholesale lending partners to make sure that each loan situation meets our lending standards. In this guide, we'll demystify LTV, how it's calculated, and what influences a successful loan application—so you can better serve your clients and expand your business.

What is LTV and Why Does It Matter?

LTV is a ratio that compares the amount of the loan and the value of the property used as collateral. It's an important ratio because it establishes how much financing is available to a borrower and the amount of risk on the loan.

For brokers and third-party originators, a strong understanding of LTV enables you to:

• Structure deals effectively – Knowing how LTV is calculated helps you set realistic expectations for your clients.
• Reduce risk exposure – The lower the LTV, the less risk for lenders, making approvals smoother.
• Enhance your competitive edge – Offering loan programs with attractive LTV terms can help you attract more borrowers.

How RCN Capital Determines LTV

When a borrower enters your pipeline, one of the initial steps is determining if their loan situation is within our guidelines. We review their experience, financial picture, and future value of the property.

At RCN Capital, we use the lesser of the purchase price or the appraised value when determining LTV. For example:

• If a property is purchased for $200,000 but appraises for $250,000, our max LTV will be based on 85% of the purchase price—not the higher appraised value.
• This means for our Rehab Cash Now loan program, we would lend $170,000 (85% of $200,000).

This conservative strategy guarantees that all borrowers have some skin in the game, minimizing default risk and safeguarding both the lender and the capital investment.

Using Additional Collateral to Maximize LTV

Another benefit of doing business with RCN Capital is our ability to structure deals flexibly. If your borrower requires extra leverage, they can pledge another property as collateral.

Here’s how this can work:

• The additional property must be a 1-4 unit residential property and be either owned free and clear or have a low existing lien balance.
• This strategy helps borrowers secure higher financing amounts without significantly increasing risk.

As a broker, knowledge of these options can allow you to offer innovative financing alternatives that will distinguish you from your competitors.

Case Study: Structuring a Loan with LTV Considerations

Let’s break down a real-world scenario where LTV plays a critical role.

• A borrower wants to purchase and rehab a property in Daytona, Florida for $150,000.
• The renovation costs are estimated at $75,000.
• The After-Repair Value (ARV) is projected at $300,000.

Here’s how we determine the loan structure:

• We can lend 85% of the purchase price, which amounts to $127,500.
• We can also finance up to 75% of the ARV for the renovation, but we will always go with the lesser amount.
• If the final appraisal supports an ARV of at least $270,000, the loan can move forward as structured.

As a wholesale lending partner, knowledge of how these calculations affect loan structuring will enable you to lead borrowers properly and close more transactions quickly.

The Role of Appraisals in LTV Determination

The proper appraisal is essential in ascertaining LTV, and it's something you and your clients should anticipate.

How We Assess ARV and LTV

• As part of the loan process, an independent appraisal is conducted.
• The borrower or their team should meet with the appraiser to provide renovation plans, scope of work, and cost estimates.
• The appraisal report includes both the current market value and the projected ARV based on planned improvements.

RCN Capital has a dedicated in-house appraisal review team that reviews these reports on a daily basis to confirm accuracy and consistency. Our underwriters then assess whether the loan situation meets our LTV guidelines.

Why LTV Knowledge is Essential for Mortgage Brokers

As a private lender or mortgage broker, knowing LTV is not just about math—it's about making more opportunities for your business.

Here’s why it matters:

1. Helps You Close More Deals

Having an understanding of how LTV operates enables you to organize loan applications better, eliminating back-and-forth delays.

2. Provides Leverage in Negotiations

By knowing how lenders such as RCN Capital evaluate risk, you can stand up for your clients and negotiate improved terms.

3. Differentiates You from Competitors

Other brokers simply make loan applications without fully comprehending LTV requirements. By providing thoughtful advice, you can establish yourself as a reliable source of financing expertise.

4. Expands Your Network

Having a lender with flexible LTV offerings means being able to serve more clients, ranging from fix-and-flip investors to rental property owners.

Why Partner with RCN Capital?

At RCN Capital, we specialize in working with wholesale mortgage brokers, private lenders, and referral partners to provide industry-leading loan programs with flexible LTV structures.

What Sets Us Apart?

• Competitive LTV offerings – Up to 90% of purchase price and 75% of ARV for rehab loans.
• Fast and reliable funding – Close deals quickly with a lender that understands speed matters.
• Expert underwriting support – Work directly with our team to navigate complex scenarios.
• Scalable solutions – Whether you work with occasional investors or high-volume clients, we have loan options to fit.