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Glossary

LTC (loan to cost)

LTC, or loan to cost, is the loan amount divided by the project cost, usually purchase price plus rehab. A lender at 90% LTC covers 90% and you bring the other 10%.

LTC is how hard money lenders size a flip loan from the cost side. LTV on ARV sizes it from the value side. The loan is the lower of the two.

How to calculate it

LTC = loan / (purchase price + rehab)

Many lenders quote LTC separately for the purchase and the rehab. Run The Deal's default is 90% of the purchase and 100% of the rehab.

Example | Blended LTC on a flip
Purchase price
$190,000
Rehab
$50,000
Total cost
$240,000
Loan: 90% of $190,000 + 100% of $50,000
$221,000
Blended LTC ($221,000 / $240,000)
92.1%
Cash you cover for purchase and rehab$19,000

Closing costs, points and carry are extra cash on top of the $19,000.

LTC vs LTV

LTC uses what you spend. LTV uses what the house is worth. A great buy has a low LTV at the same LTC. A lender that caps both, say 90% LTC and 75% of ARV, protects itself if your price was too high.

What to watch

  • Ask whether closing costs count in "cost." Most lenders do not finance them.
  • 100% rehab coverage usually still comes in draws, so you front work.
  • High LTC means less cash in and more interest. Check your peak cash.

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