The leverage measure for construction, rehab, and value-add deals.
The Loan-to-Cost Ratio (LTC) is the size of a loan expressed as a percentage of the total cost of the project — typically purchase price plus rehab or construction budget. It is the leverage metric of choice for construction, rehab, and value-add lending where there is no stabilized "value" to lend against yet.
LTC is how construction lenders, fix-and-flip lenders, and value-add bridge lenders measure leverage. Because the asset doesn't have a stabilized income or value yet, the lender can't simply use LTV — there's nothing to value against. Instead, the loan is sized against the cost of the project itself, with rehab dollars typically advanced in draws as work is completed.
A common structure on a fix-and-flip loan is 90% of purchase + 100% of rehab, with a backstop cap of 70–75% LTARV (Loan-to-ARV — see ARV). Translated to LTC: a borrower funding a $200,000 purchase with $80,000 in rehab and a $250,000 loan is at 89.3% LTC ($250k ÷ $280k total cost).
On ground-up construction, LTC is the standard sizing metric — typically 70–85% of total project cost (land + hard construction + soft costs), with the loan funded as draws against completed line items. The borrower's equity goes in first, then the loan funds the rest as the project progresses.
LTC interacts with LTV at the back end of the deal. A loan can be high on LTC and still safe on LTV-at-completion if the project creates equity through construction or rehab. That spread — cost vs. completed value — is where the lender's and the borrower's safety margin actually lives.
| Purchase price | $220,000 |
| Rehab budget | $95,000 |
| Total project cost | $315,000 |
| Loan: 90% of purchase ($198k) + 100% of rehab ($95k) | $293,000 |
| LTC = $293,000 ÷ $315,000 | 93.0% |
| ARV (After Repair Value) | $425,000 |
| LTARV check = $293,000 ÷ $425,000 | 69.0% ✓ (under 75% cap) |
For fix-and-flip and rehab loans, 85–90% LTC is the market standard. For ground-up construction, 75–85% is typical. The right LTC depends on the operator's track record and the strength of the ARV — high LTC with a thin ARV margin is the kind of deal that gets capped.
LTC = loan ÷ project cost; LTV = loan ÷ property value. Construction and rehab loans use LTC because there is no stabilized value to measure against yet. Stabilized rental and bridge loans use LTV because the asset already has a market value.
On ground-up construction, yes — soft costs (architect, permits, engineering, carrying costs) are part of total project cost. On fix-and-flip, lenders typically only count purchase + hard rehab costs, with soft costs assumed to be borrower-paid.
On rare experienced-operator programs, yes — a loan that funds 100% of purchase plus 100% of rehab on a strong ARV margin can technically exceed 100% LTC. These deals are uncommon and require strong sponsor history.
The portion of the loan tied to rehab or construction is held back and released as the work is completed and verified. A typical draw schedule has 3–6 milestones (e.g., demo, framing, MEP, finishes) and each draw is inspected before release.
Matrix funds fix-and-flip, value-add bridge, and ground-up construction at the maximum LTC the project warrants. Fast underwriting, real draw management, and no 90-day bank committee.
