LTV (Loan-to-Value) is the loan amount divided by the property's current or after-repair value (ARV), expressed as a percentage. LTC (Loan-to-Cost) is the loan amount divided by the total project cost (purchase price + rehab + closing costs + carrying costs), expressed as a percentage. Hard money lenders use whichever ratio produces the lower loan amount — which often catches borrowers off guard when the two calculations give different results.
If you're shopping for hard money loans, your lender is running two calculations on every deal you submit. Most borrowers only think about one.
Here's what happens: You find a property, run the numbers, and think you know exactly how much you can borrow. Then your lender comes back with a lower number than you expected. Because they calculated both LTC and LTV, and one of them is constraining your loan amount.
In my 20+ years working with hard money brokers and lenders, I've watched deals fall apart because borrowers didn't understand this distinction. They'd secured a property on the assumption of a certain loan amount, only to discover the lender would only fund less. Knowing the difference between LTC and LTV — and how lenders use them together — saves you from being surprised.
Loan-to-Value (LTV) compares your loan amount to the property's value — typically the after-repair value (ARV) for fix-and-flip deals, or the current market value for stabilized properties.
LTV Formula:
LTV = (Loan Amount ÷ Property Value) × 100
LTV Example:
You're buying a house for $150,000 that you'll renovate to an ARV of $280,000. Your lender offers 70% LTV based on ARV.
Loan Amount = $280,000 × 70% = $196,000
At 70% LTV, you'd be approved for a $196,000 loan.
Why LTV matters: It protects the lender if they have to foreclose and sell the property. A lower LTV means more equity cushion. For fix-and-flip deals, lenders focus on ARV-based LTV because the property will be worth more after renovation.
Loan-to-Cost (LTC) compares your loan amount to the total cost of completing the project — everything you need to spend to make the deal work.
LTC Formula:
LTC = (Loan Amount ÷ Total Project Cost) × 100
What counts as "Total Project Cost":
LTC Example:
Same property:
Your lender offers 75% LTC.
Loan Amount = $230,000 × 75% = $172,500
At 75% LTC, you'd be approved for a $172,500 loan.
Why LTC matters: It ensures you have enough capital to actually complete the project. It forces a realistic assessment of every cost — not just purchase and rehab, but the carrying costs that eat into profits while the property sits.
| Aspect | LTV | LTC |
|---|---|---|
| Compares loan to... | Property value (current or ARV) | Total project cost |
| Formula | Loan ÷ ARV | Loan ÷ (Purchase + Rehab + Closing + Carrying) |
| Focuses on | Property's worth after rehab | Money needed to complete project |
| Lender's concern | Resale risk / equity cushion | Cash flow / borrower's ability to finish |
| Typical range (fix-flip) | 65-75% | 70-80% |
Here's the critical insight most hard money borrowers miss: professional lenders calculate both LTC and LTV, then offer you whichever produces the smaller loan amount.
This is where deals get surprised.
Complete Deal Scenario:
Lender Terms:
Calculation 1 — LTV-Based Loan:
LTV Loan = $320,000 × 70% = $224,000
Calculation 2 — LTC-Based Loan:
LTC Loan = $285,000 × 75% = $213,750
The Constrained Loan: $213,750 (the lower of the two)
You were hoping for $224,000 based on ARV. But the lender is constrained by the total project cost calculation and will only provide $213,750. That $10,250 gap comes from your own capital.
Why both ratios matter:
Borrowers who only think about LTV get blindsided when LTC comes in lower.
Fix-and-Flip Deals:
Buy-and-Hold / Rental Properties:
New Construction:
Variables that move these numbers:
When you search lenders on Broker Cheetah, you're not just getting a list of names — you're getting real lending data including both LTC and LTV ratios for each lender.
More importantly, our deal calculator applies both ratios and shows you the constrained loan amount based on your specific deal — the real number you'll receive, not the optimistic one. This means you can compare across multiple lenders and see that one lender might give you $225,000 while another gives you $210,000 on the same deal, before you ever send a quote request.
Which is more important for a hard money loan — LTV or LTC?
Both matter equally but protect different risks. LTV protects the lender against a market downturn or valuation miss. LTC protects against you running out of money mid-project. In practice, whichever ratio is lower will determine your loan amount, so you need to understand both before approaching lenders.
What happens if my LTC and LTV calculations give different numbers?
Your lender will offer you the lower amount — the "constrained loan." If LTC gives $180,000 and LTV gives $210,000, you'll get $180,000. You'll need to cover the gap with your own capital or restructure the deal (lower rehab budget, higher down payment, shorter carry time). Always calculate both before committing to a purchase.
What is ARV and how does it relate to LTV?
ARV is After-Repair Value — the property's market value after you complete all renovations. For hard money loans, lenders use ARV-based LTV because they're lending on the property's future value, not its current distressed condition. If a property is worth $150,000 today but will be worth $280,000 after your $60,000 rehab, the lender bases LTV on the $280,000 figure. This is why fix-and-flip investors can often borrow more on hard money than from traditional banks.
Can I get a hard money loan with 80% LTC?
Yes, but it depends on your experience and the lender. Experienced investors with strong track records can hit 80%+ LTC with specialized hard money lenders. First-time borrowers typically see 65-75%. The more equity you bring to the deal, the more aggressive lenders can be on LTC because you have more skin in the game.
Do all hard money lenders use both LTC and LTV?
Most professional hard money lenders use both, but some emphasize one over the other. A lender focused on valuation risk might lead with LTV and use LTC as a secondary check. A lender focused on borrower sustainability might lead with LTC. The best lenders are transparent about how they use both ratios.
Broker Cheetah searches 200+ verified hard money lenders by LTC, LTV, loan type, and state. Create a free account with five Credits, enter your deal details, and compare matches based on actual lender criteria before sending a quote request.
Justin is the founder of Broker Cheetah and Power Loan Group, with over 20 years of experience in hard money lending and real estate investment. He has originated and managed over $58 million in hard money loans across fix-and-flip, new construction, and value-add residential deals.
Last Updated: April 2026
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