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Investment Property LTV: Limits, Math and How to Lower It

See the maximum LTV on investment property for purchases and refinances, with worked examples, down payment math and how DSCR loans can change the ceiling.

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Investment Property LTV: Limits, Math and How to Lower It
Written by Christopher Arco, President, NMLS #1281 ·

For a conventional (Fannie Mae or Freddie Mac) loan, the maximum loan-to-value ratio on an investment property is 85% for a one-unit purchase and 75% for a two- to four-unit purchase. Cash-out refinances are tighter: 75% for one unit and 70% for two to four units. Non-QM programs such as DSCR loans set their own limits, and those depend on the program, the property and your credit profile. Below is how LTV is calculated, what each limit means in dollars, and how to bring your ratio down.

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TL;DR

  • LTV is your loan amount divided by the appraised value (or the price, whichever is lower, on a purchase), expressed as a percentage.
  • Conventional investment limits: 85% LTV for a 1-unit purchase, 75% for 2 to 4 units, and 75% or 70% on a cash-out refinance.
  • That means at least 15% down on a single-family rental and 25% down on a duplex, triplex or fourplex.
  • Lower LTV usually improves approval odds and pricing, and conventional loans over 80% LTV require mortgage insurance.
  • DSCR and other non-QM loans qualify the property on rent rather than your personal income, and their LTV caps are set program by program.

Table of Contents

What LTV means on an investment property

LTV compares what you borrow with what the property is worth. The Consumer Financial Protection Bureau explains that a bigger down payment lowers the ratio, and that lenders use it to decide whether to lend, whether mortgage insurance or a government-backed loan is needed, how much you can borrow and what rate to offer.

The formula is simple: loan amount divided by appraised value, times 100. The National Association of Realtors gives the example of a $240,000 loan on a property appraised at $300,000, which is an 80% LTV, even if the selling price was $310,000. The appraisal is what counts, so a low appraisal can shrink your loan and raise the cash you need at closing.

On an investment property, LTV matters more than on a primary home. Lenders treat rentals as higher risk, so they cap the ratio lower and often look harder at reserves and credit.

Maximum LTV for investment property: conventional limits

Maximum LTV for investment property: conventional limits

Fannie Mae’s 2026 Eligibility Matrix sets the maximum LTV for a 1-unit investment property purchase at 85% and for a 2- to 4-unit purchase at 75%. That equals minimum down payments of 15% and 25%. Freddie Mac’s Seller/Servicer Guide uses the same purchase limits and the same limits for a no-cash-out refinance.

For a cash-out refinance, the same Freddie Mac section caps a 1-unit investment property at 75% and a 2- to 4-unit property at 70%. Fannie Mae’s Eligibility Matrix shows the same pattern, and a limited cash-out refinance on a 1- to 4-unit property tops out at 75%.

Transaction1 unit2 to 4 units
Purchase85%75%
Limited cash-out (rate-and-term) refinance75% (Fannie Mae); 85% (Freddie Mac, no-cash-out)75% (Fannie Mae); 75% (Freddie Mac, no-cash-out)
Cash-out refinance75%70%

These are agency ceilings. An individual lender can set a lower cap, and guidelines are updated from time to time, so confirm current figures before you plan a deal around them.

What the limits mean in dollars

Percentages are abstract until you apply them to a real price. Here are three illustrative scenarios.

Investment property LTV examples in dollars

Single-family rental purchase at $400,000. At 85% LTV, the loan is $340,000 and the down payment is $60,000.

Fourplex purchase at $400,000. At 75% LTV, the loan is $300,000 and the down payment is $100,000. The same price needs $40,000 more cash because the property has more units.

Cash-out refinance on a single-family rental appraised at $500,000. At 75%, the new loan can be up to $375,000. If you owe $250,000, that leaves roughly $125,000 before closing costs and any other liens.

Notice that the property can appraise below the price you agreed. If the $400,000 rental appraises at $380,000, the 85% limit applies to $380,000, so the maximum loan is $323,000 and you cover the gap.

These figures are examples only, not offers or commitments to lend.

Down payment, mortgage insurance and credit

The Mortgage Reports notes the minimum down payment on an investment property is often 15%, though some lenders still require 20%, with better pricing at 25% down. Anything under 20% down on a conventional loan generally brings mortgage insurance, which adds to your monthly cost and lowers cash flow.

That is the practical reason many investors aim for 75% LTV or lower. You avoid mortgage insurance, and a ratio below 80% tends to improve both approval chances and pricing, as lenders see more of your own money in the deal.

Combined loan-to-value (CLTV) is worth knowing too. It adds second mortgages and home equity loans to the first loan, so a rental with a HELOC on it can run higher than its first-mortgage LTV suggests.

Other factors that affect the ratio you can use

LTV is only one gate. Conventional investment loans also depend on:

Because conventional rules lean on your tax returns and personal debt-to-income ratio, the LTV you can reach on paper is not always the LTV you can actually close at.

How to lower your LTV

If your ratio is above the limit, or just above a threshold you want to beat, you have a few levers.

  1. Put more down. Each additional 5% of the price moves LTV by five points. On a $400,000 rental, going from 15% to 20% down takes you from 85% to 80% and from $340,000 to $320,000 borrowed.
  2. Negotiate the price. Because lenders use the lower of price or appraisal on a purchase, a lower price directly lowers the loan needed.
  3. Choose a lower-unit property. A single-family rental allows 85%, while a fourplex stops at 75%.
  4. Pay down principal before refinancing. Every dollar you pay off lowers the numerator in the LTV formula.
  5. Add value before you appraise. Documented improvements can support a higher appraised value. If you are mid-renovation, our rehab loans and bridge loans are built for properties in transition, and you can refinance into longer-term financing afterward.
  6. Skip a second lien. Adding a HELOC or second mortgage raises your CLTV, which affects approvals on later deals.

If you are comparing small versus larger buildings, this overview of multifamily financing options shows how the 2 to 4 unit and 5-plus unit categories are financed differently. Buildings with five or more units move into commercial underwriting, and our multifamily commercial loans cover that category.

DSCR and non-QM loans: a different way to set LTV

Conventional limits assume you qualify on personal income. Many investors do not fit that mold. A self-employed investor with large write-offs, a borrower with many financed properties, or a foreign national may do better with a program that qualifies the property itself.

A DSCR (debt service coverage ratio) loan uses the property’s rental income to qualify. Your personal income is not part of the equation, the loan can close in an LLC, and there is no limit on the number of financed properties. DSCR loans are for investment, non-owner-occupied property only, never a primary residence. Our credit minimum for DSCR is 640. Here is how that changes the LTV picture:

  • LTV still matters. Non-QM lenders cap LTV by program, purchase versus refinance, property type and credit profile. Expect cash-out to be capped lower than purchase, as it is in the conventional world.
  • Rent drives the loan, not your tax return. DSCR compares rental income to the property’s payment. A higher down payment lowers the payment and can strengthen the coverage ratio, so lower LTV helps twice.
  • Foreign nationals typically see tighter caps. Programs for borrowers without U.S. credit or documentable U.S. income often set a lower maximum LTV. Our NONI investment loans are designed for foreign nationals and borrowers with no documentable income.
  • Self-employed borrowers have another option. If you want to qualify on your own income instead of rent, a non-owner-occupied bank statement loan uses 12 to 24 months of deposits instead of tax returns.

Prepayment penalties are common on investor loans. Whether they are available, and how they are structured, varies by state, and they are restricted in several. Prepayment terms are confirmed at application, so ask about them before you lock a structure.

To see how the main investor products compare, read our investment property loan types guide. If you are approaching conventional property-count limits, our article on how to bypass conventional property limits explains where non-QM fits.

Our perspective

Most investors we talk with ask about LTV first and income second. We think that order should be flipped. The right loan is the one that matches how you actually earn and how the property performs, and the LTV follows from that.

A conventional loan can offer a high LTV on paper, but it asks for tax returns, a clean debt-to-income ratio and a strict cap on financed properties. If you are self-employed, your write-offs can pull your reported income below what those guidelines accept, even when the property cash flows well.

That is why we specialize in non-QM and alternative-income programs. With a DSCR loan, the property’s rental income is the qualifying income. With a bank statement loan, your deposits tell the story instead of your returns. And a dedicated loan officer handles your file personally, so you talk to the person structuring your deal rather than a call center.

Our advice: work out your target LTV before you make an offer, then pick the program that fits your documents. Bring your numbers early, and we will help you structure the deal.

Christopher Arco, NMLS #1281

Talk to a lender about your property

If you want to know where your deal lands, start with the program that fits how you qualify. Our DSCR loans are built for investors who want to qualify on rental income, with no cap on the number of financed properties. You can also see our full investment property mortgage page for the purchase and refinance options we offer.

Bring the purchase price or estimated value, the current loan balance if you are refinancing, the expected monthly rent and your target down payment. A loan officer at 1st Nationwide Mortgage, BBB A+ rated, can walk you through the structure at 1stnwm.com.

FAQ

What is the maximum LTV for an investment property?

On a conventional loan, the maximum is 85% for a 1-unit purchase and 75% for a 2- to 4-unit purchase. Cash-out refinances are capped at 75% for one unit and 70% for two to four units. Non-QM programs such as DSCR loans set their own caps, which vary by program and borrower profile.

How much do I need down on an investment property?

Under the conventional limits, at least 15% on a single-family rental and 25% on a two- to four-unit property. Some lenders ask for more. Closing costs and reserves are separate, and Fannie Mae requires six months of reserves on an investment purchase.

Is LTV based on the price or the appraised value?

It is based on the appraised value, or the purchase price if that is lower on a purchase. A low appraisal reduces the loan amount you qualify for, so you may need to bring more cash or renegotiate.

Does LTV work differently on a DSCR loan?

DSCR loans still use LTV, but the property’s rental income qualifies the loan instead of your personal income. Maximum LTV depends on the program, the transaction type and your credit profile, and DSCR loans are for non-owner-occupied investment property only. A loan officer can confirm the figures for your scenario.

Sources

For illustration only. Not a commitment to lend. NMLS #1281. Equal Housing Lender.