Two of the most important acronyms in real estate investing: LTC (Loan-to-Cost) and LTV (Loan-to-Value). Understanding the difference determines how much money you need to bring to the table.
LTV — Loan-to-Value
LTV compares the loan amount to the property’s current appraised value.
Formula: LTV = Loan Amount ÷ Property Value × 100
Example: $160K loan on a $200K property = 80% LTV
LTV is used for stabilized properties — purchases, refinances, and DSCR loans.
LTC — Loan-to-Cost
LTC compares the loan amount to the total project cost (purchase + rehab).
Formula: LTC = Loan Amount ÷ Total Project Cost × 100
Example: $190K loan on a project with $200K total cost = 95% LTC
LTC is used for rehab and construction loans where value will increase.
ARV — After Repair Value
ARV is the projected value after renovation. Lenders cap loans based on both LTC AND ARV to manage risk.
Example: 95% LTC AND 75% ARV means your loan is the lesser of 95% of costs or 75% of the future value.
Hard Hat Capital’s LTC/ARV Caps
- Cosmetic Rehab: Up to 95% LTC / 75% ARV
- Structural Rehab: Up to 80% LTC / 75% ARV
- New Construction: Up to 95% LTC / 75% ARV