About the Loan to Cost Calculator
Loan to cost (LTC) compares the size of a loan with the total cost of a project — purchase or land price plus construction or renovation, soft costs and closing costs. Construction lenders, bridge lenders and hard money lenders use LTC to decide how much of a project they will fund, because for a building that does not exist yet, cost is easier to verify than value.
Enter each cost bucket, the loan you are being offered and the lender’s maximum LTC. The calculator shows your LTC ratio, the total project cost, the cash equity you need to bring at that loan amount, and the maximum loan and minimum equity at the lender’s limit. Add the after-repair or as-completed value to see the loan-to-ARV ratio, the second test many rehab lenders apply.
It is built for property flippers, BRRRR investors, small developers and anyone comparing construction loan term sheets. Lenders differ on which costs they will finance — some exclude closing costs, interest reserves or developer fees — so match the inputs to the lender’s definition of cost.
With the default inputs, the loan to cost (ltc) is 80%. Change any value above to recalculate instantly.
How to use the loan to cost calculator
- 1Enter the purchase or land price.
- 2Add construction or rehab costs, soft costs and closing costs.
- 3Enter the loan amount you have been offered.
- 4Enter the lender’s maximum LTC to see the largest loan and smallest equity check.
- 5Add the after-repair value to compare loan to ARV.
Formula and method
Loan to cost divides the loan amount by the all-in cost of the project. The total cost is the land or purchase price plus hard construction or rehab costs, soft costs such as architecture, engineering, permits and insurance, and closing and financing costs. Whatever the loan does not cover must come from the borrower as equity.
Multiplying total cost by the lender’s maximum LTC gives the largest loan available under that test. Many lenders also cap the loan at a percentage of the after-repair or as-completed value (loan to ARV or loan to value), and the binding limit is whichever produces the smaller loan. LTC uses cost, while LTV uses appraised value, so a project bought well below value will show a much lower LTV than LTC.
- LTC
- Loan to cost ratio
- ARV
- After-repair value or as-completed value
- Equity
- Cash the borrower contributes
Worked examples
Fix-and-flip with an 80% LTC loan
Total cost is $300,000 + $120,000 + $25,000 + $10,000 = $455,000. A $364,000 loan is 80% LTC, so you bring $91,000. At the lender’s 85% maximum the loan could be $386,750, cutting equity to $68,250, and the loan is 60.7% of the $600,000 ARV.
Ground-up build above the lender’s limit
A $5.75M project with a $4.025M loan is 70% LTC, but this lender caps construction loans at 65%. The maximum loan is $3,737,500, so the developer must bring $2,012,500 of equity rather than $1,725,000.
90% LTC hard money loan
All-in cost is $250,000, and a $225,000 loan is exactly the 90% maximum, leaving $25,000 of equity. The loan is 68.2% of the $330,000 ARV, inside the 70%–75% ARV cap many hard money lenders use.
Frequently asked questions
What is loan to cost?+
Loan to cost is the loan amount divided by the total cost of a project, including purchase price, construction or rehab, soft costs and closing costs. It is the main sizing test for construction, bridge and fix-and-flip loans.
What is a typical LTC for a construction loan?+
Many bank construction loans are capped around 65% to 80% of cost, while some hard money and private lenders go to 85% or 90% of cost for experienced borrowers. The limit depends on the lender, the project and the borrower’s track record.
What is the difference between LTC and LTV?+
LTC divides the loan by the project’s cost; LTV divides it by the appraised or completed value. If you create value through renovation or development, LTV will be lower than LTC. Lenders often apply both and lend the smaller amount.
How do I calculate the equity needed for a construction loan?+
Multiply the total project cost by the lender’s maximum LTC to get the largest loan, then subtract it from total cost. On a $455,000 project at 85% LTC the loan is $386,750 and you need $68,250 of equity.
Do lenders include closing costs in loan to cost?+
It varies. Some lenders finance closing costs, interest reserves and fees as part of the budget, while others count only the purchase and construction costs. Ask for the lender’s definition so your LTC matches their underwriting.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.