The first question most private lenders ask isn’t about your credit. It’s about your equity. How much you can borrow depends mostly on your home’s value and what you already owe against it. That relationship is called loan-to-value, or LTV. Here’s how it works and how to estimate where you stand.

What loan-to-value means

LTV is the total of all the mortgages and secured loans on a property, divided by the property’s value.

Total mortgages ÷ property value = LTV

If your home is worth $500,000 and you owe $250,000 on your mortgage, your LTV is 50%. You have 50% equity.

How lenders use it

Each private lender sets a maximum LTV, the most it will let the total mortgage debt reach. The maximum depends on the lender, the property and the location, and lenders don’t all use the same limit.

To estimate how much you could borrow, work backwards. As an example, using round numbers only to show the math: if a lender’s limit were 75% on a $500,000 home, total mortgage debt could reach $375,000. If you already owe $250,000, the room left is about $125,000, before fees and costs come out.

Combined LTV for second mortgages

If you keep your current mortgage and add a private second mortgage, the lender looks at combined LTV: the first mortgage plus the new second, together. Any line of credit secured on the home (a HELOC) usually counts too, sometimes at its full limit even if you haven’t used all of it.

What can lower the limit

  • Rural or acreage properties, which can take longer to sell
  • Smaller towns with fewer buyers
  • Homes needing major repairs or with unusual features
  • Condos with low reserve funds or special assessments
  • Properties with tax arrears or liens that must be paid first

Where the value comes from

The lender relies on an appraisal, not the assessed value on your property tax notice and not what you hope the home is worth. Appraisals can come in lower than expected, which changes how much is available. It’s wise to plan for a conservative value.

Why fees matter to your number

Lender fees, broker fees and legal costs are usually taken from the loan. If you need $80,000 in hand, you may need to borrow more than $80,000, and that larger amount has to fit under the LTV limit. Our guide to fees explains what to expect.

Lower LTV, better terms

Borrowing less than the maximum can mean a lower rate and lower fees, and leaves you a cushion if values dip. See what drives private mortgage rates.

Get a realistic estimate

A broker can give you a quick, realistic range based on your property, your existing mortgage and what you need the money for.

This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.