LTV (Loan-to-Value Ratio)

LTV (loan-to-value) is the ratio between the amount of a loan and the value of the asset securing it, expressed as a percentage: LTV = outstanding loan / collateral value × 100. A EUR 600,000 loan on a property appraised at EUR 1,000,000 has an LTV of 60%. The lower it is, the further the asset's value can fall before the collateral no longer covers the debt. In tokenized real estate debt, it is one of the first figures an investor should look at.

How it is calculated. The numerator is the outstanding principal, not the original amount, so LTV falls as the loan is repaid. The denominator is the collateral's value at a given date: usually an independent appraisal, although the purchase price is sometimes used. That is why an LTV should always come with the value used and its date. There are variants:

• Combined LTV: adds up all the debt secured by the same asset, not just the investor's.
• LTC (loan-to-cost): divides the loan by the project's total cost; it is used in developments, where the asset does not exist yet.
• Maximum agreed LTV: a limit the contract may set; if it is exceeded, the borrower must do whatever the contract provides, such as repaying part of the loan or posting more collateral.

Example in a tokenized offering. A special purpose vehicle (SPV) owns a property appraised at EUR 1,000,000. It has a EUR 400,000 bank loan with a first-ranking mortgage and raises another EUR 200,000 from investors through tokenized debt secured by a second-ranking mortgage. The figures are illustrative and do not include the cost of enforcing the collateral:

On its own, the tokenized loan seems to have an LTV of 20% (200,000 / 1,000,000), but it gets paid after the bank: it starts losing money when the value falls below EUR 600,000 (a combined LTV of 100%) and loses everything below EUR 400,000. Its tranche sits between 40% and 60% of the value, and that is what to look at, not the stand-alone figure. The remaining 40% is the SPV shareholders' equity, which absorbs losses first and whose return is measured with IRR or MOIC, not LTV. If the financing is a participating loan, which ranks behind ordinary creditors, the cushion left by the debt ahead of it matters even more.

What tokenization changes. The smart contract does not appraise the property: the value comes from an off-chain appraisal. If LTV is monitored on-chain, for example to alert token holders when it exceeds a limit, that figure comes in through an oracle and is only as reliable as the appraisal feeding it. In addition, transferring a token is not enough to transfer a mortgage: in Spain, a mortgage-backed claim can be assigned under Article 1526 of the Civil Code, but the assignment of title to the mortgage must be made in a public deed and recorded in the Land Registry (Article 149 of the Mortgage Act). The offering documents should therefore explain who is recorded as the mortgagee and how the collateral is enforced on behalf of the token holders. More in private credit tokenization.

Limits in the rules. Regulation uses LTV as a threshold in specific contexts. One example in Spain: for a loan secured by a real estate mortgage to be included in the cover pool of mortgage covered bonds (cédulas hipotecarias), it may not exceed 60% of the property's appraised value when it is added, or 80% if the property is residential; if the collateral later loses value and the loan exceeds that limit, it counts only up to the limit for coverage purposes (Article 23(2) of Royal Decree-Law 24/2021). This is a rule for covered bonds issued by credit institutions, not a cap on tokenized debt, but it shows how the regulator uses this measure. In funds, leverage is measured against net asset value: an ELTIF that can be marketed to retail investors may borrow no more than 50% of its net asset value (Article 16(1)(a) of Regulation (EU) 2015/760).

Official sources: Royal Decree-Law 24/2021, Article 23 (BOE); Spanish Mortgage Act, Article 149 (BOE); Spanish Civil Code, Articles 1526-1528 (BOE); Regulation (EU) 2015/760, consolidated text (EUR-Lex).

Framework verified as of October 13, 2026. At Unknown Gravity we build the platform, smart contracts and data integrations for a tokenized debt offering; the appraisal, the collateral structure and the legal analysis are the work of independent appraisers and advisors. Talk to us.