Two investors get quoted the same "90%" by the same lender and walk away with wildly different amounts of money. One brings $30,000 to closing. The other brings $85,000. Nothing about the properties is dramatically different — but one was quoted 90% LTC and the other was quoted 90% LTV against a different number.
LTV and LTC are the two ratios that determine the size of nearly every investor loan written in this country. Understanding the difference between them is not academic. It is the difference between correctly forecasting your cash-to-close and being surprised at the closing table three days before you're supposed to fund.
This guide breaks down LTV vs. LTC in plain terms: what each ratio measures, which one your lender will use on which product, why bridge and rehab lenders quote both at once, and how to structure a deal so the ratios work in your favor. At Funded Capital, we quote both ratios up front on every term sheet, because an investor who can't model their own cash-to-close isn't ready to close in five days.
What LTV and LTC Actually Measure
Both ratios express the same idea — the loan amount divided by something — but that "something" is the entire story.
Loan-to-Value (LTV)
LTV = Loan Amount ÷ Property Value
LTV measures your loan against what the property is worth. Value is established by an appraisal or broker price opinion, not by what you paid. A $400,000 loan on a property appraised at $500,000 is an 80% LTV.
LTV is the language of stabilized, income-producing assets. It's what a DSCR loan is sized on, because the lender's collateral is a finished, rentable property with a knowable market value today. Our DSCR program goes up to 80% LTV, meaning on that $500,000 rental, the maximum loan is $400,000.
Loan-to-Cost (LTC)
LTC = Loan Amount ÷ Total Project Cost
LTC measures your loan against what the project costs you — typically purchase price plus rehab or construction budget. A $360,000 loan on a deal with a $300,000 purchase price and a $100,000 rehab budget ($400,000 total cost) is a 90% LTC.
LTC is the language of projects in motion. It's what fix and flip and new construction lenders use, because at the moment of funding there is no stabilized value — there's a plan, a budget, and a contractor. Our Fix & Flip program goes up to 90% LTC and New Construction up to 85% LTC.
The Core Distinction: Value vs. Cost
Here's the distinction that costs investors money when they miss it: LTV rewards you for buying below market. LTC does not.
If you buy a property worth $500,000 for $350,000 — a genuine off-market steal — an 80% LTV loan gives you $400,000, more than the purchase price. An 80% LTC loan on that same deal gives you $280,000, because your cost was $350,000. The equity you created by negotiating hard is invisible to the LTC calculation.
This is exactly why rehab lenders lead with LTC rather than LTV. It keeps the borrower's own capital in the deal. A lender who sized purely on value would be funding investors with zero skin in the game on discounted acquisitions — and investors with no capital at risk behave differently when a project goes sideways.
| LTV | LTC | |
|---|---|---|
| Denominator | Appraised property value | Purchase price + rehab/construction budget |
| Typical products | DSCR, rental, cash-out refinance | Fix & flip, new construction, bridge |
| Rewards buying below market? | Yes | No |
| Requires an appraisal? | Always | Usually, but as a constraint, not the driver |
| Funded Capital max | Up to 80% (DSCR) | Up to 90% (Fix & Flip), 85% (New Construction) |
Why Rehab Lenders Quote Both at Once
Here's where most investors get tripped up. On a fix and flip or construction loan, you are almost never sized on LTC alone. You're sized on LTC and capped by a value-based ratio — usually ARV, or after-repair value.
A typical structure looks like this: up to 90% LTC, not to exceed 70% of ARV. The lender runs both calculations and funds the lower of the two. The tighter constraint wins.
Work a real deal through it:
- Purchase price: $300,000
- Rehab budget: $100,000
- Total project cost: $400,000
- After-repair value (ARV): $520,000
The LTC test: 90% × $400,000 = $360,000 The ARV test: 70% × $520,000 = $364,000
The lender funds the lower figure — $360,000 — and your cash-to-close is $40,000 plus closing costs and carrying reserves. In this deal, LTC is the binding constraint.
Now change one variable. Suppose the ARV comes back at $480,000 instead:
The LTC test: 90% × $400,000 = $360,000 The ARV test: 70% × $480,000 = $336,000
Now the ARV test binds. Your loan drops to $336,000 and your cash requirement jumps to $64,000 — a $24,000 swing driven entirely by an appraisal, with no change to your purchase price or budget. This is the single most common reason a deal that "penciled" falls apart late.
If you're modeling deals, run both tests every time. The 70% rule exists precisely because seasoned flippers internalized the ARV constraint and started underwriting to it before the lender ever ran the number.
How Each Ratio Drives Your Cash-to-Close
Your down payment isn't a number a lender picks. It's the residual left over after the binding ratio does its work — which is why hard money down payment requirements feel inconsistent across deals.
| Scenario | Structure | Loan Amount | Cash-to-Close* |
|---|---|---|---|
| Flip, strong ARV | $400K cost, 90% LTC binds | $360,000 | $40,000 |
| Flip, weak ARV | $400K cost, 70% ARV binds | $336,000 | $64,000 |
| DSCR refi, bought below market | $500K value, 80% LTV | $400,000 | Cash out, if basis is lower |
| New construction | $600K cost, 85% LTC | $510,000 | $90,000 |
*Excludes closing costs, points, and interest reserves.
The strategic takeaway: LTC governs the acquisition, LTV governs the exit. You buy and build on cost, then refinance or sell on value. That's the entire mechanical engine behind the BRRRR strategy — you use LTC financing to create value, then convert to an LTV-based DSCR loan that recognizes the value you built and returns your capital.
How to Improve the Ratio You Get
The ratio a lender offers you is not fixed. Three things move it:
Experience. Track record is the most powerful lever on LTC. An investor with eight completed flips will be offered leverage a first-timer won't, because the lender is pricing execution risk, not just collateral risk.
Budget credibility. An inflated rehab budget mathematically raises your total cost and therefore your LTC-based loan — but underwriters know this, and a budget that doesn't survive scrutiny gets cut, which moves the binding constraint against you. Submit a real, contractor-backed scope.
Defensible comps. Because ARV so often becomes the binding test, the comparable sales you present matter as much as the property itself. Bring recent, proximate, genuinely comparable sales — not the one outlier that flatters your number.
Model Both Ratios Before You Offer — We'll Show You Ours
The investors who close fast are the ones who already know both numbers before the term sheet arrives. They've run the LTC test, run the ARV test, identified which one binds, and know their cash-to-close to the dollar.
Funded Capital quotes both ratios explicitly on every term sheet — no discovering a hidden constraint on day four. We issue term sheets in as little as 2 hours and close in as little as 5 days, with no income verification on most programs. Fix & Flip from 8.75% up to 90% LTC. New Construction from 8.75% up to 85% LTC. DSCR from 6.0% up to 80% LTV. We lend in 44 states from our Miami headquarters.
Run your numbers on our deal calculator, see how the process works, or apply now and get real terms on a real deal today.
Frequently Asked Questions
What is the difference between LTV and LTC? LTV (loan-to-value) divides the loan amount by the property's appraised value. LTC (loan-to-cost) divides the loan amount by your total project cost — purchase price plus rehab or construction budget. LTV measures the loan against what the property is worth; LTC measures it against what you're spending.
Which ratio do hard money lenders use? Most rehab and construction lenders use both. They size the loan to a maximum LTC (often 85–90%) but cap it at a percentage of ARV (commonly 65–75%), then fund whichever calculation produces the smaller loan. Stabilized rental products like DSCR are sized on LTV alone.
Can I get 100% financing if I buy far below market value? Rarely on an LTC-based product, because LTC ignores the discount you negotiated — your loan is a percentage of what you paid, not what it's worth. Some investors approach full financing by combining a high-LTC first position with separate gap capital, but the lender will still require your own capital at risk on the primary loan.
Why did my loan amount drop after the appraisal? Almost certainly because the ARV or value test became the binding constraint. If the appraisal comes in below your projection, the value-based cap tightens below your LTC-based number and the lender funds the lower figure — increasing your cash-to-close.
Does LTC include closing costs and interest reserves? Generally no. LTC is calculated on purchase price plus the approved rehab or construction budget. Points, closing costs, and interest carry are typically your responsibility on top of the down payment, which is why cash-to-close is always higher than the down payment alone.