LTC (Loan-to-Cost)
The loan amount divided by the total project cost (purchase price plus rehab), as a percentage. LTC is the key leverage ratio on fix-and-flip and construction loans, used alongside ARV-LTV.
Loan-to-cost (LTC) is the percentage of a project's total cost that a lender will finance:
LTC = Loan Amount ÷ Total Project Cost
where total project cost = purchase price + rehab budget (and sometimes closing costs). LTC is the central leverage metric on fix-and-flip and ground-up construction loans, where the finished value doesn't exist yet and the lender is funding costs in real time.
LTC vs. LTV — the two-cap system
Rehab lenders almost always underwrite to two ceilings at once, and the loan is the lower of:
- LTC — a percentage of your purchase + rehab cost (commonly up to 85–90% of purchase and 100% of rehab).
- ARV-LTV — a percentage of the projected after-repair value (commonly 65–75%).
Whichever constraint produces the smaller loan wins. This protects the lender both ways: LTC keeps you with skin in the game on cost; ARV-LTV keeps total exposure below the finished value.
A worked example
| Item | Amount |
|---|---|
| Purchase price | $200,000 |
| Rehab budget | $50,000 |
| Total cost | $250,000 |
| ARV | $350,000 |
| Lender: 90% of purchase | $180,000 |
| Lender: 100% of rehab | $50,000 |
| Max loan by LTC | $230,000 (92% LTC) |
| Lender: 70% of ARV | $245,000 |
| Loan = lower of the two | $230,000 |
Here LTC is the binding cap. Your cash in the deal is the $20,000 gap (purchase not covered) plus closing costs and reserves.
How rehab dollars are funded
The purchase portion funds at closing; the rehab portion is held back and released through a draw schedule as work is completed and inspected. So even though the loan is sized to LTC up front, you receive the rehab share over time.
Why LTC matters to your returns
Higher LTC means less cash tied up, which boosts your cash-on-cash return on a flip. But maxing leverage raises your rate and points and shrinks your margin for error if the rehab overruns. Experienced flippers shop LTC and ARV-LTV together, because the real question isn't 'what's the rate' but 'how much cash will this deal actually require.'
Frequently asked questions
What's the difference between LTC and LTV?
LTC compares the loan to your total cost (purchase + rehab). LTV compares the loan to the property's value — as-is on a refinance, or after-repair (ARV-LTV) on a flip. Fix-and-flip lenders use both caps and lend the lower of the two.
How much LTC can I get on a fix-and-flip loan?
Commonly up to 85–90% of the purchase price plus 100% of the rehab budget, subject to the ARV-LTV cap (often 65–75% of after-repair value). Experienced borrowers and strong deals get the higher end; the loan is always the lesser of the LTC and ARV-LTV limits.
Does LTC include closing costs?
Sometimes. Some lenders define total cost as purchase plus rehab only; others fold in closing costs and certain soft costs. It varies by lender, so confirm exactly what's in the cost base when comparing LTC offers — it changes how much cash you bring.