Loan-to-Cost (LTC) Calculator
Find the loan-to-cost ratio and required equity on a development or rehab deal from the loan amount and total project cost.
How it works
Total project cost = purchase + construction + soft costs · LTC = loan ÷ total project cost × 100 · Equity required = total cost − loan
Loan-to-cost measures the loan as a share of what a project actually costs to build or rehab — purchase price plus construction plus soft and closing costs. Construction and bridge lenders cap LTC (often 70–80%) to ensure the developer has real equity at risk, which aligns incentives and cushions the lender if costs overrun. It differs from loan-to-value (LTV), which compares the loan to the finished appraised value: LTC looks at money spent, LTV at value created. On a profitable project the LTC is higher than the LTV because total cost is less than end value.
Worked example
A project costs $500,000 to buy, $300,000 to build and $50,000 in soft costs — $850,000 total. A lender offers a $600,000 loan. Loan-to-cost is 600,000 ÷ 850,000 = 70.6%, so you must fund the remaining $250,000 of equity yourself.
Frequently asked questions
How is LTC different from LTV?
LTC compares the loan to what the project costs (purchase plus construction plus fees), while LTV compares it to the finished, appraised value. A well-run project ends up worth more than it cost, so its LTV is lower than its LTC — and lenders often test the loan against both limits.
What LTC do lenders allow?
Construction and bridge lenders typically cap loan-to-cost around 70–80%, requiring the sponsor to contribute the rest as equity. Stronger borrowers and lower-risk projects can push toward the top of that range; riskier ground-up builds sit lower.
Why do lenders require equity in the deal?
Requiring the developer to fund 20–30% of cost keeps the borrower financially committed and gives the lender a buffer against cost overruns and value shortfalls. A borrower with real equity at stake is far less likely to walk away if the project runs into trouble.
Related calculators
Educational estimate, not financial or investment advice. Real returns depend on financing, local costs and market conditions.