LTC vs LTV Explained: What Real Estate Investors Need to Know Before They Apply for a Private Money Loan

LTC and LTV sound similar — but confusing them can cost you the deal.

If you've spent any time researching private money loans, you've seen these two terms everywhere — LTC and LTV. They sound similar, they're often used interchangeably, and that confusion alone has caused more than a few investors to misunderstand what they're actually being offered. Let's clear it up once and for all.

What Is LTV — Loan to Value?

LTV stands for Loan to Value. It's a ratio that compares the loan amount to the current market value of the property.

LTV = Loan Amount ÷ Appraised Property Value

For example, if a property is appraised at $200,000 and you're borrowing $160,000, your LTV is 80%.

LTV is the most commonly used metric in traditional lending and is typically applied to:

• Stabilized rental properties

• DSCR loans

• Cash-out refinances

• Bridge loans on properties that don't need significant work

The key word with LTV is value — what the property is worth right now, as it sits today.

What Is LTC — Loan to Cost?

LTC stands for Loan to Cost. It's a ratio that compares the loan amount to the total cost of the project — not the current value of the property.

LTC = Loan Amount ÷ Total Project Cost

Total project cost typically includes:

• The purchase price of the property

• Estimated rehab or construction costs

• Sometimes closing costs and carrying costs depending on the lender

For example, if you're buying a property for $150,000 and putting $50,000 into the rehab, your total project cost is $200,000. If the lender is offering 90% LTC, they'll lend you up to $180,000 against that $200,000 total cost.

LTC is most commonly used in:

• Fix and flip loans

• Ground-up construction loans

• Rehab and renovation financing

• Any deal where the property's current value is significantly lower than its projected value after work is complete

The key word with LTC is cost — what it's going to take to complete the project, not what it's worth today.

Why the Difference Matters

Here's where investors get tripped up. A lender advertising "up to 95% LTC" on a fix and flip is not the same as a lender offering "up to 80% LTV" on a rental property — even though both are expressing how much they'll lend relative to a number.

With LTC, that number is your total project cost. With LTV, that number is the appraised value. Depending on the deal, those two numbers can be very different — and so can the loan amount you actually receive.

A Side by Side Example

Let's say you're buying a distressed property for $100,000 that needs $60,000 in rehab. After repairs the property will be worth $220,000.

• Total project cost: $160,000

• After repair value (ARV): $220,000

Now let's look at how LTC and LTV produce different loan amounts:

At 90% LTC: $160,000 x 0.90 = $144,000 loan

At 80% LTV based on current value: If the property is currently worth $110,000, that's $110,000 x 0.80 = $88,000 loan

At 70% of ARV: $220,000 x 0.70 = $154,000 loan

Same property. Three very different loan amounts — depending on which metric the lender uses. This is why it's critical to understand exactly what basis a lender is using when they quote you a loan amount.

What Is ARV and How Does It Fit In?

You'll also hear the term ARV — After Repair Value. This is the projected market value of the property after all renovations are complete. Many fix and flip and rehab lenders will lend against a percentage of ARV rather than current value or cost, because the deal's potential matters more than where it starts.

ARV based lending is common in fix and flip financing and is typically expressed as something like "up to 70% of ARV" — meaning the lender will loan you up to 70% of what the property will be worth after the work is done.

Which Metric Will Your Lender Use?

It depends entirely on the loan product and the lender. Here's a general guide:

• Fix & Flip loans — typically LTC and/or ARV based

• DSCR loans — LTV based on appraised value

• Bridge loans — LTV based on current value

• Ground-Up Construction loans — LTC based on total project cost including land and construction budget

• Cash-out refinances — LTV based on appraised value

Why This Matters Before You Apply

Understanding which metric your lender is using helps you in three important ways:

1. You know how much you actually need to bring to the table

If a lender offers 90% LTC on a $200,000 project, you need $20,000. If a lender offers 80% LTV on a property currently worth $120,000, you need $24,000 plus your rehab budget out of pocket. Those are very different positions to be in.

2. You can compare lender offers accurately

Two lenders can both say "we'll lend you 80%" and mean completely different things if one is using LTC and the other is using LTV. Always ask: 80% of what exactly?

3. You can structure your deal around the right metric

Knowing which metric applies to your deal type helps you underwrite it correctly from the start — so you're not surprised at the closing table.

The One Question to Always Ask

Whenever a lender quotes you a loan amount or a maximum lending percentage, ask this one question:

"Is that based on purchase price, total project cost, current appraised value, or after repair value?"

That single question will tell you everything you need to know about how much you're actually being offered — and eliminate a lot of confusion before it costs you time or money.

Still Not Sure How Your Deal Works Out?

Bring it to us. We'll run through the numbers with you, tell you which metric applies to your specific loan type, and give you a clear picture of what you can expect before you ever submit an application. No runaround, no surprises. Email: erik@prosperaprivatecapital.com Call/TXT 541-816-1311 Intake Form: https://api.lassomoney.com/intake/ea39d3c3-ed3c-4cda-bcc4-34aedcc57350