CLTV: Cumulative Loan To Value Ratio

CLTV stands for cumulative, or combined, loan to value ratio. This ratio is meant to determine the combined value of all debt on a piece of commercial real estate relative to the total property value. For example, if a borrower has a property worth $1 million, with a first mortgage of $500,000 and a second mortgage of $200,000, the combined debt amount is $700,000 and the CLTV would be 70%. The CLTV is used by commercial, and multifamily mortgage lenders to manage risk. First lien holders and second lien both take CLTV into account. First lien holders will use the CLTV to determine if they will allow a borrower to take on subordinate debt, if in fact they allow for subordinate debt. The first mortgage lender often caps, or even doesn’t allow, the amount of subordinate debt in order to ensure that the borrower has sufficient skin in the game and is sufficiently tied to the property. Second lien holders look at the CLTV to determine their risk in entering a deal, because their loan is going on top of a loan that has a priority lien.

The formula for CLTV (the cumulative, or combined loan to value ratio) is:

CLTV = Total Combined Loan Amounts / Total Property Value

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