A financial term commonly used by lenders to describe the ratio of the outstanding principal balance of a loan to the appraised value of the project. The loan to value is usually expressed as a percentage. Calculating the loan to value helps the lender determine the riskiness of a loan. Loans with a higher loan to value are considered riskier because the borrower has less equity in the project.

For more information on when lenders use loan to value calculations, see Practice Note, Basics of Secured Commercial Real Estate Financing.