Loan to value (LTV) compares a loan to the property's appraised value. Loan to cost (LTC) compares it to the total cost of the project, including purchase and rehab or construction. Lenders use LTV for rentals and refinances and LTC for flips and ground-up builds. Lendoor, a nationwide direct lender, frames its flip and construction programs by cost.
Loan to value is the loan amount divided by the property's value. Value usually means the appraised value or the purchase price, whichever is lower.
LTV = Loan amount ÷ Property value
If a property appraises at $400,000 and the loan is $300,000, the LTV is 75%. The rest is your equity or down payment.
LTV is the standard measure for loans on finished, stabilized property. Rental loans, DSCR loans, and cash-out refinances are usually sized on LTV, because the lender's main protection is what the property is worth today.
Loan to cost is the loan amount divided by the total cost of the project.
LTC = Loan amount ÷ Total project cost
Total project cost usually includes the purchase price (or land cost) plus the rehab or construction budget. Some lenders also count certain soft costs, such as permits or plans. Ask your lender what it includes before you run the numbers.
LTC is the standard measure for projects where the value doesn't exist yet. On a flip or a new build, the property is worth more after the work is done, so the lender looks at how much of your real spending it is covering.
ARV stands for after repair value. It is the expected value of the property once the rehab or construction is finished, usually set by an appraisal based on comparable finished homes.
LTARV = Loan amount ÷ After repair value
Most flip and construction lenders check two limits at once: a cost limit (LTC, or a percentage of purchase and rehab) and a value cap (LTARV). The loan is the lower of the two. The ARV cap protects the lender if the budget is high compared with what the finished property will be worth. Lendoor's ARV cap is up to 75% LTARV for flips and up to 75% of completed value (LTARV) for ground-up.
| Loan to value (LTV) | Loan to cost (LTC) | |
|---|---|---|
| Formula | Loan ÷ property value | Loan ÷ total project cost |
| Measured against | Appraised value or purchase price | Purchase or land + rehab or construction budget |
| Typical loans | DSCR rental loans, cash-out refinances, bridge loans on finished property | Fix and flip, ground-up construction, heavy rehab |
| What it protects | Lender's position against today's value | Lender's exposure against what the project actually costs |
| Usually paired with | Appraisal | ARV / LTARV cap and a draw schedule |
| Rehab or build funds | Not usually included | Often included and paid out in draws |
A simple rule of thumb: if the property is finished and earning, expect LTV. If you are buying something to fix or build, expect LTC plus an ARV cap.
The numbers below are round and made up to show the math. They are not Lendoor terms or a quote.
| Item | Amount |
|---|---|
| Purchase price | $200,000 |
| Rehab budget | $50,000 |
| Total project cost | $250,000 |
| After repair value (ARV) | $360,000 |
Say a hypothetical lender offers 85% of purchase, 100% of rehab, and caps the loan at 70% of ARV.
LTC = $220,000 ÷ $250,000 = 88%. LTARV = $220,000 ÷ $360,000 = 61%.
Notice the two views of the same loan. Against cost, the lender is covering most of your spending. Against the finished value, the loan is well under the cap. If the ARV had come in at $300,000, the ARV test would be $210,000, and that lower number would set the loan.
Again, these are round, made-up numbers, not Lendoor terms.
| Item | Amount |
|---|---|
| Land cost | $100,000 |
| Hard construction costs | $300,000 |
| Soft costs (plans, permits) | $20,000 |
| Total project cost | $420,000 |
| Completed value (ARV) | $560,000 |
Say a hypothetical lender offers 85% LTC with a 75% cap on completed value.
Your cash in the deal is $420,000 − $357,000 = $63,000. On construction loans, the build portion is usually released in draws as work is completed and inspected, so you don't receive it all at closing. For the full process, see our guide to new construction loans for investors.
Lendoor sizes flips and ground-up builds on cost, because that's what matters when you're writing the checks. Current program details are on our programs page.
| Program | How Lendoor frames leverage |
|---|---|
| Fix and flip | Up to 100% of purchase and up to 100% of rehab, with $0 down |
| Fix and flip, zero experience | Up to 90% of purchase and up to 100% of rehab |
| Ground-up construction | Up to 92.5% LTC |
| Ground-up, zero experience with a GC | Up to 95% LTC; the GC does not sign the loan |
| DSCR rental | Sized on LTV: up to 85% on purchases |
A few notes on reading these:
Lendoor lends in 45 states. The excluded states are Nevada, Utah, North Dakota, South Dakota, and Alaska. As a direct lender, Lendoor underwrites and funds its loans. You can read more about Lendoor.
Once a flip or build turns into a rental, the loan usually switches from cost-based to value-based. See our guide to DSCR loans in Texas for how rental loans are sized.
For flips and new builds, LTC tells you how much cash you need to bring, so it drives your return. LTARV tells you whether the deal still works if values come in low. Watch both. A high LTC with a thin ARV margin can leave you with little room to sell at a profit after costs.
For rentals and refinances, LTV matters more. It sets how much you can borrow or pull out against the value the property has today.
Loan to value compares the loan to the property's appraised value. Loan to cost compares the loan to the total project cost, including purchase and rehab or construction. LTV is used for finished property, and LTC is used for flips and new builds.
Divide the loan amount by the total project cost. For example, a $220,000 loan on a project costing $250,000 is 88% LTC. Ask your lender which costs it includes.
LTARV is loan to after repair value. It divides the loan amount by the property's expected value after the work is done. Flip and construction lenders often cap loans at a percentage of ARV.
Most fix and flip lenders size loans on cost, as a percentage of purchase and rehab, and then apply a cap based on after repair value. The loan is usually the lower of the two.
No. Covering 100% of purchase and 100% of rehab is a cost-based measure. The loan is still limited by the property's after repair value, so it is not a loan for 100% of the property's value.
Lendoor offers up to 92.5% LTC on ground-up construction. Borrowers with no building experience who use a general contractor may qualify for up to 95% LTC, and the GC does not sign the loan.
Yes. Lendoor's zero-experience fix and flip program offers up to 90% of purchase and up to 100% of rehab. All loans are subject to underwriting.
Send us the purchase price, budget, and expected after repair value. Submit your deal and we'll review it and send terms. See all programs on our programs page.
About the author
Dana Lefkowitz is a Co-Founder of Lendoor. NMLS #1997062.
Lendoor, LLC, NMLS #2856707. This article is general information, not a loan offer or commitment. All loans are subject to underwriting and approval. Terms vary by property and borrower.
Dana Lefkowitz is the Co-Founder of Lendoor LLC and a licensed mortgage loan originator (NMLS #1997062) specializing in private real estate financing for investors nationwide.
Lendoor LLC is a direct lender based in Arizona.
NMLS #2856707
Dana Lefkowitz, Responsible Individual, NMLS #1997062
NMLS Consumer Access: nmlsconsumeraccess.org
Lendoor LLC offers business-purpose loans secured by non-owner-occupied investment real estate only. We do not make loans for personal, family, or household purposes. Loans are available nationwide except in Nevada, Utah, North Dakota, South Dakota and Alaska.
Lendoor® and the Lendoor logo are registered trademarks of Lendoor, LLC. Lendoor, LLC is not affiliated with Lendoor Inc., a former New York company, or with any cryptocurrency or crowdlending platform.
