Loan-to-value is the amount of a loan expressed as a percentage of the value of the property that secures it. A facility of CHF 6'000'000 against a property valued at CHF 10'000'000 sits at 60% LTV; the remaining CHF 4'000'000 is the borrower's own equity, and it absorbs a fall in value before the investor does. Our published deal box sets the ceiling at 75%. Here is how the ratio is built, what it protects against, where it can mislead, and how we read it when a file arrives.
The cushion, measured
Underneath every secured loan sits a simple piece of arithmetic about distance. If the property is worth more than the debt on the day the security is enforced, the investor is made whole; if it is worth less, someone absorbs a loss, and the order of absorption is fixed in advance. The borrower's equity stands in front. At 60% LTV the market has to fall by 40% before the loan is reached, while at 80% the same protection is half as deep.
That distance has to cover more than a change in price. A forced sale rarely fetches what a willing seller would get in an open market, enforcement itself has costs, and interest accrues while the procedure runs. So the cushion is doing several jobs at once, which is why investors care about the difference between 60% and 80% far more than the twenty points suggest.
Rank decides who the cushion belongs to. A ratio only means something at a stated position in the register: a second-rank lender at a headline 50% LTV may stand behind a first charge that consumes most of the value. We covered how priority forms, and why it pairs with this ratio, in the first-rank explainer.
The denominator is an opinion
The loan amount is a fact; the value is an estimate. Everything the ratio promises depends on how that estimate was made, by whom, and when. European supervisors treat this as seriously as the lending itself: the European Banking Authority's guidelines on loan origination and monitoring (EBA/GL/2020/06, published 29 May 2020 and applied since 30 June 2021) require property collateral to be valued by professional, independent valuers at origination and revalued through the life of the loan.
Regulation has also started to lean against optimistic denominators. Under the EU's CRR3 capital rules, in force since January 2025, the value a bank counts for capital purposes is capped at a multi-year average, so a short-lived price spike can't quietly flatter a loan's ratio; we walked through those rules in our Basel III note. In Switzerland, capital requirements for high-LTV mortgage lending have been tightened repeatedly, and the Swiss National Bank's Financial Stability Report 2026, published 2 July 2026, records the share of new mortgages with high loan-to-value ratios declining. The supervisory direction of travel is one way: harder valuations, more capital against thin cushions.
For a reader of any loan book's figures, the practical question follows from this. Before asking whether a ratio is low, ask what valuation it was calculated on, how recent it is, and whether the valuer stood independent of the deal.
Where the ratio misleads
The figure is a snapshot. A loan written at 65% two years ago sits at whatever the market has since made of it, and nothing in the loan file updates itself. Monitoring exists precisely because origination LTV ages.
Development lending bends the measure further, because a half-built scheme has no stable value to divide by. Development lenders therefore track loan-to-cost, the loan against the project's total budget, alongside any value-based measure. The scale of the difference shows up in market data: the Bayes Business School report on UK commercial real estate lending for the first half of 2025, published in October 2025, recorded residential development financing running at an average loan-to-cost of 63% while margins on that lending fell below 500 basis points for the first time since 2020.
A low ratio built on a wrong valuation is a high ratio in disguise, and the reverse also holds: 80% against a conservative, current, independent valuation can be a sounder position than 55% against a stale or hopeful one. Read with its valuation, its date and its rank, the ratio says a great deal; read on its own, it can say the opposite of the truth.
Where Watson AM fits
Our published case files start at 25%, on a Geneva residential scheme where heavy sponsor equity and a prime location left the security worth roughly four times the facility. Across funded projects, the median is 65%.
Lowest published
25%
LTV among the twelve published case files
Median LTV
65%
across funded projects
Deal box ceiling
up to 75%
published maximum LTV
The spread follows the files. LTV enters our nine-step diligence at the financial and collateral review, where the valuation behind the denominator is challenged before the ratio is relied on, and again at security design, where the cushion is confirmed before anything is registered. A file at 75% can clear that process when the valuation is solid and the exit is clear, and a file at 50% can fail it when they are not, because the ratio is one input and the case around it decides.
For investors reading our case files, the published figures carry facility, jurisdiction, LTV, term and status deal by deal, so the ratio can be read in context rather than as a portfolio abstraction. Investor and borrower material is available on request.
Common questions
What is a good loan-to-value ratio for a property loan?
There is no single good number; the ratio has to be read against the asset, the stage of the project, the rank of the security, and the exit. Watson AM's published deal box runs to a maximum of 75% LTV, and the median across funded projects is 65%. A workable test is whether the distance between the loan and the value would absorb a forced-sale discount and the costs of enforcement at that rank.
What is the difference between LTV and LTC?
Loan-to-value divides the loan by the property's value; loan-to-cost divides it by the project's total cost. Development lenders lean on loan-to-cost because a half-built scheme has no stable market value to divide by. In the UK, the Bayes Business School lending report for the first half of 2025 recorded residential development financing at an average loan-to-cost of 63%.
Does a low LTV mean a loan is safe?
A low ratio narrows the investor's exposure, and that genuinely matters, but the figure is only as reliable as the valuation underneath it and it says nothing about rank. A modest ratio calculated on a hopeful valuation offers less protection than it appears to, and a junior charge at a low headline ratio can recover less than a senior charge at a higher one.
Watson AM, Basel. This article is general market commentary for professional and qualified investors and for real-estate developers. It isn't investment, legal, or tax advice, or an offer of any financial product.
Sources
- European Banking Authority, Guidelines on loan origination and monitoring (EBA/GL/2020/06), 29 May 2020, applied since 30 June 2021, on collateral valuation, independent valuers, and monitoring. eba.europa.eu.
- Swiss National Bank, Financial Stability Report 2026, published 2 July 2026, on high-LTV mortgage lending, tightened capital requirements, and the declining share of new high-LTV mortgages. snb.ch.
- Bayes Business School (City St George's, University of London), Commercial Real Estate Lending Report, H1 2025, published 22 October 2025, on development lending volumes and the 63% average loan-to-cost for residential development financing; coverage via IPE Real Assets, October 2025.
- European Union, Regulation (EU) 2024/1623 (CRR3), in force from 1 January 2025, on property-valuation averaging for capital purposes.