Loan-to-Cost (LTC) Ratio Calculator
LTC = loan amount divided by total project cost. Construction lenders use LTC instead of LTV because there's no appraised value yet. Typical LTC limit: 65-80% depending on lender and asset class.
| Total project cost | — |
| Loan amount | — |
| Loan-to-Cost ratio | — |
| Loan-to-Value (vs ARV) | — |
| Sponsor equity required | — |
| Equity as % of total cost | — |
Loan-to-Cost (LTC) ratio divides the construction loan by total project cost (land + hard + soft + contingency). Lenders use LTC for development projects because there's no appraised value during construction. Typical limits: 65-75% for ground-up, 70-80% for value-add rehab. LTC differs from Loan-to-Value (LTV), which uses finished stabilized value.
LTC vs LTV — When Each Applies
LTC is used during construction and rehab — when there's no completed appraisal. LTV is used for stabilized property loans against finished value. Construction lenders typically run BOTH tests: loan must satisfy LTC cap (e.g. 75% of cost) AND LTV cap (e.g. 70% of as-completed value), whichever is lower. The 'lesser of' constraint protects the lender if budget overruns push cost above ARV.
Sponsor Equity Stack
If lender funds 75% LTC, sponsor must contribute 25% equity. On a $3M project that's $750K cash. Sponsors who lack full equity stack add mezzanine debt (10-15% rate, second position) or preferred equity (8-12% pref + small profit share) to fill the gap. Be aware lenders often require sponsor 'skin in the game' minimum (commonly 10% true cash equity) regardless of mezzanine availability — this prevents 100% leveraged speculation.
Last updated May 2026. Sources: FDIC RBC Examination Manual.