Glossary › Glossary
LTC stands for Loan-to-Cost — the loan amount expressed as a percentage of the total project cost (purchase price plus rehab budget). Hard money lenders use LTC to determine how much of a fix and flip or construction project they will finance. Most programs cap at 85-90% LTC for experienced borrowers, meaning the borrower must cover the remaining 10-15% plus closing costs from their own capital.
LTC = Loan Amount ÷ Total Project Cost
Total project cost = Purchase price + Rehab budget (for fix and flip and construction deals)
Example:
The borrower in this example brings $37,500 (15%) plus closing costs to the table.
For stabilized properties — rentals, commercial assets — lenders use LTV (Loan-to-Value) because the property has a clear current market value.
For fix and flip and construction deals, LTV to the current (as-is) value would be too restrictive. A distressed property worth $100,000 today might need $70,000 in rehab to reach a $240,000 ARV. An LTV-based loan on the $100,000 current value would only fund $75,000 — not enough to even buy the property, let alone renovate it.
LTC solves this by measuring the loan against the total cost of the project, not the current depressed value. It allows the lender to fund a realistic portion of the full investment required.
Hard money lenders apply both LTC and ARV caps simultaneously, and the loan is limited to whichever produces the lower amount.
Example:
85% of $250,000 = $212,500 75% of $320,000 = $240,000
The LTC cap is lower at $212,500, so that is the maximum loan.
Now change the ARV to $270,000: 75% of $270,000 = $202,500
Now the ARV cap is lower at $202,500. ARV becomes the binding constraint, and the borrower must bring more equity.
This dual-cap structure protects the lender on both dimensions: the project economics (LTC) and the exit value (ARV LTV).
LTC is not a fixed number — it varies based on borrower experience, credit, and the specific lender's program.
A first-time fix and flip investor might get 75-80% LTC from lenders who have first-timer programs. An investor with 10+ completed deals might access 85-90% LTC from more lenders with fewer conditions.
The same deal — same property, same numbers — gets a different LTC offer depending on who the borrower is. This is why borrower experience is one of the most important matching variables when finding the right lender for a deal.
LTC is calculated on purchase price plus rehab budget. It typically does not include:
The borrower funds all of these separately from the loan proceeds.
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