What's your best loan-to-value ratio for real estate financing?

To an extent. Recently the cost to get the rate you want known as pricing is better with a higher than 80% loan to value because it comes with mortgage insurance. Mortgage insurance compensates the lender in the even of a loss from foreclosure thereby reducing the lenders risk with a guaranteed payment. The downside to mortgage insurance is the increased cost to the borrower. The upside is that the borrower doesn't need to invest such a large sum of money to acquire a home.

In commercial transactions, not only is LTV important to lenders relative to a potential foreclosure, it also partially drives the DSC ratio. The lower the leverage, typically the DSCR is higher which is ultimately integral to the payment of mortgage obligations. A 50% LTV loan is definitely preferable relative to a lenders risk appetite; however, the DSCR ultimately pays the bills. For example, in NY or CA cap rates are low which drives the LTV lower, however, DSCR ratio might be tight.

In my experience, the optimal loan-to-value (LTV) ratio for real estate financing depends on location appreciation rates, interest rates, transaction cycles, and the potential value generated by the property purchase. These factors play a significant role in assessing the risk and potential returns associated with different LTV ratios. By closely monitoring market trends, consulting with professionals, and considering the specific circumstances, I have found it easier to determine the appropriate LTV ratio for your real estate financing needs.

Higher costs can equate to a higher interest rate for the borrower/buyer, but having a high LTV (aka lower downpayment) can help those in high cost of living housing markets who do not want to/cannot put down 20%.

Lenders utilize the LTV ratio to assess your creditworthiness and evaluate the level of risk associated with granting you a loan. A lower LTV enhances your chances of loan approval and can result in more favorable interest rates and fees. It demonstrates that you have a greater stake in the property and are less likely to default on the loan. Conversely, a higher LTV indicates an increased risk for the lender, potentially leading to stricter requirements, higher costs, or a reduced loan amount. Lenders consider the LTV ratio a key factor in determining loan terms when seeking a loan.

There are also specific lenders that can offer higher loan to value ratios based on your employment. Doctor loans or Professional loans (Attorneys for example) are two that come to mind. The bank is looking to develop a long term relationship with these borrowers as they get started with their careers.

In my experience conventional loans can go up to as high as 95% LTV for purchase when supported by private mortgage insurance (PMI).

Conventional loans can go to 97% in many instances with Fannie Mae's HomeReady and Freddie Mac's HomePossible and PMI is much less expensive than in years past.

Save as much as you can for your downpayment!! If it's at least 20 percent and no need for mortgage insurance! This will put you in much better financial position to purchase a home in Toronto!

LTV is subjective based on the type of real estate, the risk of the underlying asset and the credit history of the buyer (at least, it's supposed to work like that). All must be taken into consideration. Why did 2008 happen? Risky loans high LTVs and no accountability. Who paid for the trillions of dollars lost? Not those who caused it, they made billions and laughed at us all, you (the tax payer paid) and your children and grandchildren did and will.

The LTV can be a nebulous and misleading concept. Back in the mid-2000's, the work-around for 80% LTV was Appraisals that came in wherever the loan officer and buyer needed them to in order to fit the LTV requirement. We all know how that worked out... Thankfully, Appraisers now are much better regulated and cognizant of the potential for misuse.