What is loan-to-cost (LTC) on a hard money rehab file?

LTC is total loan amount divided by all-in project cost — purchase, rehab scope, contingency, and allowed soft costs — expressed as a percentage. A 90% LTC on $200,000 all-in cost yields up to $180,000 in financing on qualified non-owner-occupied bridge files at 8.99%–13.5% IO.

How is LTC different from LTV on a flip?

LTC uses total spend as the denominator; LTV uses property value — as-is on acquisition or ARV on exit. LTC answers how much of the project budget the lender funds. LTV and ARV cap can produce a lower number than LTC on the same deal.

When does LTC bind as the limiting constraint?

LTC binds when your LTC percentage times all-in cost is lower than the ARV cap and as-is LTV limits. Common on cosmetic flips with strong ARV spread — heavy rehabs with thin ARV margins often bind on ARV cap instead.

Blog

Understanding Loan-to-Cost Ratios in Hard Money

Published June 12, 2026 · Updated July 18, 2026

By Jason Taken · Principal, Jaken Finance Group

LTC for fix-and-flip and rehab bridge — formula, binding constraint vs ARV cap, draw schedules, and a full worked example showing when LTC limits your leverage.

Loan-to-cost (LTC) tells you what share of your total project spend a hard money lender will fund. For non-owner-occupied fix-and-flip and value-add bridge files, LTC is the ratio investors quote first — and misapply most often by ignoring ARV cap and as-is LTV on the same term sheet.

Jaken Finance Group sizes qualified investment-property bridge at 8.99%–13.5% interest-only with up to 90% LTC on many rehab files and up to 100% LTC on select qualified programs when economics support risk. The funded loan is always the minimum of LTC, ARV cap, and acquisition LTV limits — not whichever headline sounds best.

This guide defines LTC, contrasts it with LTV, walks through draw mechanics, and delivers a binding constraint worked example you can replicate before LOI.

What is a hard money loan · LTV fundamentals · ARV cap vs LTC.

LTC formula and what counts in “cost”

LTC = (Loan Amount ÷ Total Project Cost) × 100

Total project cost typically includes:

Cost bucket	Usually included?
Purchase price or acquisition basis	Yes
Rehab scope (materials + labor)	Yes
Contingency (10%–15% of scope)	Yes
Permits, plans, engineering	Often — confirm with lender
Interest reserve	Sometimes capitalized — policy-specific
Closing costs, points	Usually excluded — sponsor cash
Carry during hold	Excluded — sponsor cash

Example: $175,000 purchase + $52,000 scope + $6,240 contingency (12%) = $233,240 all-in. At 90% LTC, max loan = $209,916.

Always reconcile all-in definition with your term sheet before modeling equity requirement.

LTC vs LTV — same loan, different denominators

Metric	Denominator	Best for
LTC	All-in project cost	Rehab/flip — “How much of spend is financed?”
LTV (as-is)	Current appraised value	Acquisition leg — “How much of today’s value?”
ARV cap	After-repair value	Exit cushion — “How much of tomorrow’s value?”

LTC can be 90% while ARV cap enforces 75% of exit — producing a lower absolute loan. Investors who budget equity using LTC alone arrive short at closing.

Demystifying LTV for investors · DSCR hold exits.

Typical LTC bands on non-owner-occupied bridge

Qualified files at Jaken Finance Group commonly see:

Program tier	LTC range	Notes
Standard fix-and-flip	Up to 90%	Cosmetic to moderate rehab
Qualified high-LTC	Up to 100%	Strong ARV spread, experienced sponsor
Heavy value-add	85%–90%	Scope risk may tighten cap
New construction	Up to 100% LTC on qualified files	As-completed value tests apply

LTC is never standalone. ARV cap up to 75% on fix-and-flip and as-is LTV on acquisition run in parallel.

Draw schedules — LTC releases in milestones

Hard money LTC is not a single wire at closing. Lenders fund:

Acquisition advance — capped by as-is LTV and initial LTC policy
Rehab draws — inspection-gated releases against scope line items
Final advance — punch-list completion

Cumulative advances cannot exceed min(LTC max, ARV cap) even if individual draws were approved incrementally.

Draw discipline protects both parties: sponsors avoid over-advancing before work is done; lenders avoid unsecured exposure beyond collateral value.

Fix-and-flip loan requirements · 100% LTC program details.

Worked example — LTC binds (binding constraint walkthrough)

Deal: Midwest 3/2 SFR, non-owner-occupied, LLC vesting. Cosmetic-to-moderate rehab.

Step 1 — Build all-in cost

Line item	Amount
Purchase price	$168,000
Rehab scope (kitchen, baths, floors, paint)	$38,500
Contingency 12%	$4,620
Permits	$1,200
Total project cost	$212,320

Step 2 — Run LTC scenarios

LTC tier	Calculation	Max loan
85% LTC	0.85 × $212,320	$180,472
90% LTC	0.90 × $212,320	$191,088
100% LTC (qualified)	1.00 × $212,320	$212,320

Policy offers 90% LTC on this file.

Step 3 — Run ARV cap

Sold comps support ARV $285,000.

ARV cap	Calculation	Max loan
75% ARV	0.75 × $285,000	$213,750

Step 4 — Identify binding constraint

Constraint	Max loan
90% LTC	$191,088
75% ARV	$213,750

LTC binds at $191,088. ARV cap is not limiting — exit spread is healthy.

Line	Amount
All-in cost	$212,320
Loan (binding)	$191,088
Cash to project	$21,232
Plus closing/points	~$5,000–$8,000 sponsor

Rate 10.75% IO on $191,088 → monthly ~$1,712.

Hold 6 months → IO carry ~$10,272.

Step 6 — Exit spread check

Line	Amount
ARV	$285,000
Less 8% sale costs	−$22,800
Net proceeds	$262,200
Less all-in cost	−$212,320
Less IO carry	−$10,272
Approx gross profit	~$39,608

LTC-bound deal with wide ARV margin — textbook cosmetic flip geometry.

Worked example — when LTC does NOT bind (contrast)

Same sponsor, different geometry — heavy rehab, thinner ARV.

Line item	Amount
Total project cost	$248,000
ARV	$305,000

Constraint	Calculation	Max loan
90% LTC	0.90 × $248,000	$223,200
75% ARV	0.75 × $305,000	$228,750

LTC still binds at $223,200. Tighten ARV to $290,000:

| 75% ARV | 0.75 × $290,000 | $217,500 |

ARV cap binds at $217,500 — $5,700 less than 90% LTC. Extra equity required vs LTC-only model.

Understanding both outcomes is the point of LTC analysis — not quoting 90% in isolation.

LTV and ARV caps guide · Using hard money to invest.

Factors that raise or lower your LTC ceiling

Sponsor track record. Documented exits support higher LTC tiers and access to 100% LTC qualified programs.

ARV spread. Underwriters compute spread = (ARV − all-in) ÷ all-in. Thin spread triggers lower LTC or tighter ARV cap regardless of headline policy.

Asset class. SFR flips fit standard grids. Manufactured, multi-family, and mixed-use carry different LTC matrices.

Scope complexity. Foundation, structural, or layout changes increase execution risk — LTC may cap below 90% even for experienced sponsors.

Market liquidity. Thin comp sets force conservative ARV, which makes ARV cap bind sooner — effectively lowering achievable LTC dollars.

LTC on BRRRR bridge vs DSCR exit

BRRRR uses LTC during bridge phase and LTV during DSCR permanent phase:

Phase	Sizing metric	Product	Rate band
Acquire + rehab	LTC + ARV cap	Hard money IO	8.99%–13.5%
Stabilized hold	As-is LTV + DSCR	DSCR P&I	5.75%–10.5%

Bridge LTC at 90% does not translate to 90% LTV on refi. Model refi at 80%–85% LTV on post-rehab as-is appraisal with executed lease.

How a DSCR loan works · Private money vs hard money.

Strategies to optimize LTC without over-leveraging

Negotiate purchase price. Every dollar off acquisition drops all-in cost — at 90% LTC, $10,000 price reduction saves $9,000 loan need and $900+ equity.

Scope discipline. Separate must-do from nice-to-have before LOI. Scope creep inflates cost faster than ARV.

Accurate contingency. Under-budgeting contingency forces out-of-pocket mid-project when draws stall.

Compare lenders on binding loan, not headline LTC. Two desks offering “90% LTC” may apply different ARV caps, contingency rules, or soft-cost inclusion.

Pre-sale or pre-lease exit. Documented exit supports higher LTC tier assignment at underwriting.

LTC checklist before you submit

Build all-in cost with scope, contingency, and allowed soft costs
Calculate LTC loan at offered tier (85%, 90%, 100%)
Calculate ARV cap loan at 75% (or desk-specific cap)
Take minimum — that is binding loan
Subtract from all-in for equity requirement
Add closing, points, and IO carry at quoted rate in 8.99%–13.5% band
Stress ARV −10% — if ARV cap becomes binding, recalculate equity
Confirm draw schedule matches contractor payment timing

Files with this math attached close in 7–14 business days on complete submissions.