What is the difference between LTV and ARV cap on a hard money loan?

LTV measures loan amount against a property value — usually as-is on acquisition. ARV cap measures total loan against after-repair value from sold comps. On rehab files the ARV cap limits total leverage even when LTC would allow a larger number.

When does ARV cap bind instead of LTC?

ARV cap binds when 75% of ARV (typical fix-and-flip ceiling) is less than your LTC-calculated loan. This happens on high-rehab deals where all-in cost is a large share of ARV — heavy gut jobs, low-ARV markets, or aggressive scope relative to exit value.

Can LTC and ARV cap both allow the same loan amount?

Yes — when 90% LTC equals exactly 75% ARV, both constraints align. More often one binds first. Underwriters fund the lower of all published caps plus any as-is LTV limit on the acquisition advance.

Blog

LTV and ARV Caps in Hard Money Lending

Published June 12, 2026 · Updated July 18, 2026

By Jason Taken · Principal

When ARV cap binds before LTC on fix-and-flip files — dual-constraint math, binding-leverage examples, and how hard money underwriters stack LTV, LTC, and ARV.

Hard money term sheets list LTC, LTV, and ARV cap in the same paragraph — then fund the lowest number. Investors who optimize only loan-to-cost routinely overestimate leverage on heavy rehabs. This guide focuses on how ARV cap and LTC interact on non-owner-occupied bridge files, when each constraint binds, and how to model binding leverage before LOI.

Jaken Finance Group underwrites qualified investment-property bridge at 8.99%–13.5% interest-only with milestone draws. Fix-and-flip sizing typically runs up to 90% LTC on all-in project cost and up to 75% ARV on after-repair value — but your file gets the minimum of every test, not the maximum headline.

What is a hard money loan · LTV fundamentals for investors · LTC deep dive.

Three leverage lines on every rehab term sheet

Metric	Denominator	Typical question
LTC	All-in project cost (purchase + rehab + soft)	How much of total spend can the lender fund?
As-is LTV	Today’s appraised value	How much against current condition on acquisition?
ARV cap	After-repair value from sold comps	How much against exit value after scope?

LTV on hard money usually appears on the acquisition leg — e.g., 85% of purchase price or as-is value. ARV cap applies to the fully drawn loan after rehab advances.

Underwriters do not pick the ratio that favors the borrower. They fund:

Loan = min(LTC max, ARV cap max, as-is LTV max on initial advance, desk policy limits)

LTC vs ARV cap — complementary, not interchangeable

Loan-to-cost (LTC) scales with what you spend. Heavy rehab inflates the denominator — so 90% LTC can produce a large absolute loan even when exit value is modest.

ARV cap scales with what you can sell for. It prevents over-leveraging against optimistic exit values — the lender’s liquidation cushion lives in the gap between loan balance and ARV.

When rehab is a small share of all-in cost (cosmetic flip), LTC often binds — you are not pushing ARV leverage hard.

When rehab is a large share of all-in cost (gut renovation), ARV cap often binds — total cost approaches exit value and 75% ARV may be less than 90% LTC.

DSCR loans for hold exits · 100% LTC program details.

Worked example — LTC binds on a cosmetic flip

Consider a hypothetical non-owner-occupied house bought for $198,000. Repairs and contingency total $32,000, bringing the stated project cost to $230,000. Assume supported after-repair value is $310,000. Closing costs, interest, and sale costs remain separate from that project-cost figure.

At a hypothetical 90% LTC limit, the cost test permits a $207,000 loan: $230,000 multiplied by 0.90. A 75% ARV limit permits $232,500. The lower cost-based result controls at $207,000, before any other program condition or acquisition advance limit.

The borrower therefore needs $23,000 toward the stated cost, plus any expenses outside the approved budget. The gap between ARV and project cost is $80,000, calculated as $310,000 less $230,000. That gap is not the borrower’s net profit or cash available at closing.

At an illustrative 11% interest-only rate, a fully drawn $207,000 balance costs $1,897.50 per month. The calculation is loan balance multiplied by 0.11, divided by twelve. Actual draw timing and the loan’s interest terms determine the interest bill during rehab.

If sale costs equal a hypothetical 8% of a $310,000 sale, those costs total $24,800. Net sale proceeds before loan payoff would be $285,200. Subtracting the $230,000 project cost leaves $55,200 before interest, points, and other omitted costs. Use a full cash budget to decide whether that remaining margin is enough.

Worked example — lower ARV changes the binding limit

Now consider a heavier rehab with a $95,000 purchase and $78,000 repair budget. The total stated project cost is $173,000. At 90% LTC, the cost-based loan ceiling is $155,700. That figure stays fixed while we test two different values.

If supported ARV is $215,000, the 75% value ceiling is $161,250. Since that exceeds $155,700, the cost limit still controls. Heavy repairs alone do not prove that the ARV cap will bind. You must calculate both tests.

Next, reduce the supported ARV to $200,000 while leaving cost unchanged. The value-based ceiling becomes $150,000, which is below the $155,700 LTC result. The ARV cap now controls and creates an additional $5,700 equity need.

Under that lower-value case, the borrower’s share of the stated project cost rises from $17,300 to $23,000. Closing costs and carry still sit outside those amounts. A buyer who planned only for the cost test would need more cash even though the contractor’s bid had not changed.

Before signing a purchase contract, test what happens if the appraiser supports fewer upgrades or a lower sale price. Ask which costs qualify for LTC and how the lender limits the first advance. Lowering a repair budget can reduce the value as well as the cost, so rerun both tests after any scope change.

Worked example — ARV cap binds hard (high LTC deals)

Investors targeting high LTC on qualified files face ARV binding more often because absolute loan approaches 75% of exit.

Line	Amount
Purchase	$120,000
Rehab + contingency	$85,000
All-in cost	$205,000
ARV	$260,000

Constraint	Math	Max loan
90% LTC	0.90 × $205,000	$184,500
75% ARV	0.75 × $260,000	$195,000

LTC binds at $184,500. Now push LTC to 100% on a qualified program:

Constraint	Math	Max loan
100% LTC	1.00 × $205,000	$205,000
75% ARV	0.75 × $260,000	$195,000

ARV cap binds at $195,000 — even though LTC math allows $205,000. Sponsor puts $10,000 more equity than a 100% LTC headline suggests.

Fix-and-flip loan requirements · Using hard money to invest.

Visual — where constraints cross

Think of LTC and ARV cap as two ceilings:

Loan amount
    │
    │     ╭── 75% ARV cap (slopes with exit value)
    │    ╱
    │   ╱  ← binding region when ARV is low
    │  ╱
    │ ╱──────── 90% LTC (slopes with all-in cost)
    └──────────────────► Project scale

When rehab spend is large relative to ARV, the ARV line sits lower. When ARV is strong relative to cost, LTC binds first.

As-is LTV — the third line on acquisition

Before rehab draws, the initial advance also faces as-is LTV. Example:

Line	Value
Purchase price	$120,000
As-is value	$115,000
85% as-is LTV cap	$97,750

If policy limits acquisition advance to 85% of as-is, first disbursement may cap at $97,750 even when LTC math allows more — remaining leverage releases through draw schedule as milestones complete, still subject to cumulative ARV cap.

Draw discipline protects the lender when condition is distressed: initial LTV reflects liquidation value today; ARV cap reflects exit tomorrow.

Rate interaction — leverage and pricing

Higher binding leverage generally maps to higher risk tier within the 8.99%–13.5% band. A file binding at 75% ARV with thin spread may price closer to 12%–13.5% IO than a cosmetic flip at 65% ARV with wide margin.

Pricing is file-specific — but sponsors should assume ARV-bound deals pay more than LTC-bound cosmetic turns because execution and liquidity risk are higher.

Hard money vs DSCR comparison · Private money vs hard money.

How to know which cap binds before submission

Run this sequence on every rehab file:

All-in cost = purchase + scope + contingency + allowed soft costs
LTC loan = LTC% × all-in cost
ARV loan = ARV cap% × ARV from sold comps (not zestimate)
Binding loan = lower of step 2 and step 3
Check acquisition leg against as-is LTV for first advance
Stress ARV −10% — if binding constraint flips or equity gap widens materially, trim scope or negotiate purchase

Spreadsheet cell to highlight: Equity gap = all-in cost − binding loan. If a lower ARV makes the required equity exceed your available cash, revise the offer or funding plan before committing.

ARV cap vs LTC — decision table for sponsors

Deal profile	Likely binding cap	Action
Cosmetic turn, ARV ≫ all-in	LTC	Optimize purchase price and LTC tier
Gut rehab, ARV ≈ 1.25× all-in	ARV or LTC — model both	Conservative comps, trim scope
High LTC qualified file	ARV	Expect equity gap vs LTC headline
Strong ARV, low purchase	LTC on cost	Negotiate seller price to widen spread
BRRRR bridge	ARV + LTC → then DSCR LTV exit	Dual model bridge and refi

Bridge exit — ARV cap connects to DSCR LTV

Fix-and-flip exit is sale — ARV cap aligns with liquidation value. BRRRR exit is DSCR refi at 5.75%–10.5% sized on as-is LTV up to 85% in select markets — a different denominator than bridge ARV.

Bridge binding at 75% ARV does not guarantee refi at 80% LTV as-is. Post-rehab appraisal, rent, and DSCR must support payoff. Files that max ARV cap on bridge with no refi cushion are sale-only exits — plan accordingly.

How a DSCR loan works · Investment financing map.