LTC (Loan-to-Cost Ratio)
Loan-to-cost is the loan amount divided by the total project cost — land, hard construction costs, soft costs, and financing costs. It applies to construction and heavy-rehab loans, where there is no stabilized value yet. Construction lenders typically cap LTC around 75–85%, requiring the sponsor to contribute the remaining equity.
Formula
LTC = Loan Amount ÷ Total Project Cost × 100LTC and LTV answer different questions: LTC limits leverage against what you're spending; LTV (based on projected as-stabilized value) limits leverage against what it will be worth. Construction loans are typically sized to the lower of the two.
A project with high projected profit may be constrained by LTC even when as-stabilized LTV looks conservative — lenders want the developer's own cash at risk.