What is Loan-to-Cost (LTC)?
Percentage of purchase + rehab the lender will finance. If a lender sets it at 90%, you put down 10% of total cost. This program publishes an ARV ceiling rather than an LTC one, and the LTC a lender offers is set deal by deal.
LTC stands for Loan-to-Cost.
Also called loan to cost, LTC ratio.
Loan-to-Cost
On a $1.5M project, 90% LTC = up to $1.35M financed.
LTC measures the loan against what the project COSTS. LTV measures it against what the property is WORTH. On a ground-up build the two can be far apart, and confusing them is one of the more expensive misunderstandings in construction finance — a deal can clear an LTC test and fail an LTV test, or the reverse, and both are usually applied.
What counts as cost is the part borrowers most often get wrong. Land, hard costs and soft costs all belong in the denominator: permits, architectural and engineering fees, insurance, and the interest carried during the build are real project costs even though none of them is lumber. Leaving them out makes a budget look better on paper and produces a funding gap in the middle of the job, which is the worst possible moment to find one.
Because the ratio is struck against total cost, LTC also sets how much equity has to be in the deal before anything draws. That equity is normally required first, so the borrower's contribution is spent before lender funds are released. Planning the cash flow around that order matters as much as the headline percentage.
Where to read next
Loan-to-cost and loan-to-value are two different ceilings is the field note on this term.
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