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, Jaken Finance Group

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 (cosmetic flip)

Southeastern SFR, non-owner-occupied.

Line	Amount
Purchase	$198,000
Rehab + contingency	$32,000
All-in cost	$230,000
ARV	$310,000

Constraint	Math	Max loan
90% LTC	0.90 × $230,000	$207,000
75% ARV	0.75 × $310,000	$232,500

LTC binds at $207,000. ARV cap is not the ceiling — there is $103,000 of spread between ARV and all-in cost.

Sponsor equity: $230,000 − $207,000 = $23,000 plus closing and carry.

At 11% IO, monthly payment on $207,000 ≈ $1,894. Spread after 8% sale costs: ARV $310,000 → net ~$285,200 minus $230,000 all-in ≈ $55,200 gross margin before carry and points — workable when timeline holds 5–7 months.

Worked example — ARV cap binds (heavy rehab)

Same market, different deal geometry — low ARV relative to spend.

Line	Amount
Purchase	$95,000
Rehab + contingency	$78,000
All-in cost	$173,000
ARV	$215,000

Constraint	Math	Max loan
90% LTC	0.90 × $173,000	$155,700
75% ARV	0.75 × $215,000	$161,250

Wait — here 75% ARV ($161,250) exceeds 90% LTC ($155,700). LTC still binds at $155,700.

Adjust ARV down to show ARV binding — realistic when comps are thin or scope overshoots market:

Line	Amount
All-in cost	$173,000
ARV (conservative)	$200,000

Constraint	Math	Max loan
90% LTC	0.90 × $173,000	$155,700
75% ARV	0.75 × $200,000	$150,000

ARV cap binds at $150,000 — $5,700 less than LTC would allow. Sponsor must inject extra equity or trim scope.

This is the scenario novices miss: they model 90% LTC on spreadsheet and arrive at closing with a $155,700 approval capped to $150,000 by ARV policy.

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 gap shrinks under ARV stress test below your cash reserve, do not bind LOI.

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.