LTC (Loan-to-Cost)
Quick Answer
The ratio of the total loan amount to the total project cost (purchase price + rehab budget).
Definition
Loan-to-Cost (LTC) is the ratio of a loan's total amount to the total cost of a real estate project, including both the purchase price and estimated renovation costs. It is expressed as a percentage. For example, if a project costs $300,000 total and the lender provides $240,000, the LTC is 80%. LTC is one of the primary underwriting metrics lenders use to assess leverage and risk in fix-and-flip deals.
Why It Matters for Flippers
LTC determines how much of your project cost the lender will fund versus how much you must contribute. Higher LTC programs (85–90%) require less cash from the borrower but carry higher rates. Lower LTC programs (70–80%) require more equity but often offer better pricing. Understanding the LTC on your deal helps you calculate your required cash-to-close accurately.
Example in a Flip Deal
Purchase price: $200,000. Rehab budget: $80,000. Total project cost: $280,000. At 85% LTC, the lender funds $238,000. The borrower contributes $42,000 at closing (plus closing costs). Rehab funds are drawn as work is completed.
Related Terms
LTV (Loan-to-Value)
The ratio of the loan amount to the appraised value of the property, expressed as a percentage.
ARV (After Repair Value)
The estimated market value of a property after all planned renovations are complete.
Rehab Budget
The estimated total cost to complete all planned renovations on an investment property.
Fix and Flip Loan
A short-term real estate loan designed for investors who buy, renovate, and resell properties for profit.