What Is Loan-to-Cost?
Loan-to-Cost (LTC) is the senior loan amount divided by total project cost — including land, hard costs, soft costs, interest reserve, and contingency. For construction and value-add deals, LTC matters more than LTV because there is no stabilized appraisal yet. The lender is funding cost, not value.
Typical LTC Caps by Lender Type
- Bank Construction Loan: 60–70% LTC
- Bank Mini-Perm / Mid-Market: 65–70% LTC
- Debt Fund / Bridge Construction: 70–80% LTC
- HUD 221(d)(4): up to 85% LTC (for multifamily ground-up)
- Mezzanine / Preferred Equity: bridges gap between senior LTC cap and ~85–90% total stack
LTC vs LTV — Which Governs?
Construction lenders typically test both LTC and LTV (as-stabilized). The lesser of the two governs the final loan amount. On a strong-market deal with rich exit valuations, LTV-as-stabilized may allow more proceeds than LTC. On a soft-market deal with thin stabilized value, LTC will be the binding constraint.
Pair this with the LTV Calculator, the Yield-on-Cost Calculator, and the Sources & Uses table to build the full capital stack.