What is a good LTC ratio?

60–70% is bank standard for construction. Higher LTC (75–85%) is available from non-bank lenders and HUD programs but priced higher.

LTC or LTV — which do lenders use?

Construction lenders use both. LTC constrains during construction; LTV constrains against completed value. The loan is sized by the more restrictive of the two.

What's included in project cost?

Land, hard costs, soft costs, financing costs, and contingency. Everything to reach certificate of occupancy.

Can LTC be over 100%?

In rare 'stretch' financings, yes — but it means the loan covers cost plus some working capital or refinance premium. Uncommon and expensive.

Loan-to-Cost Calculator

Loan-to-cost is the primary sizing metric for construction and development loans, the same way loan-to-value is the primary metric for stabilized permanent loans. It measures how much of your total project cost — every dollar in — the lender is willing to fund. This calculator gives you the number in seconds.

Enter total project cost and loan amount to compute Loan-to-Cost (LTC) — the sizing metric construction lenders use.

What counts as total project cost

Land, hard construction, architecture and engineering, permits and impact fees, financing costs (loan fees, interest reserves), soft costs (legal, insurance, marketing), developer fee, and contingency. Everything to get the building to certificate of occupancy.

LTC vs. LTV

LTC is anchored to cost — protects the lender if the developer overpays for land or overspends on construction. LTV is anchored to appraised value — protects the lender against market changes. Construction loans use LTC and often add an LTV constraint on the completed appraisal.

Typical LTC ranges

Bank construction loans: 60–70% LTC. Non-bank / debt fund: 65–80% LTC. HUD 221(d)(4) multifamily construction: up to 85% LTC. Higher LTC comes with higher cost and stricter draw controls.

Equity requirement

Whatever LTC doesn't cover, the developer covers with equity — either sponsor equity or LP capital. A 70% LTC deal on a $10M project requires $3M in equity, which drives partnership terms, IRR splits, and deal-level economics.

Cost overruns and the LTC ceiling

Once a construction loan closes at a fixed LTC, additional cost is almost always the sponsor's problem. If the project runs $12.5M on a $12M budget originally funded at 70% LTC ($8.4M loan), the extra $500K generally comes out of equity — the loan does not grow to preserve the ratio. This is why lenders scrutinize the contingency line before closing (typically requiring 5–10% for new construction, 10–15% for renovation) and why hard-cost overruns above budget are the single most common cause of failed developments. Underwrite contingency to a stress case, not an average case, and don't spend it early to unlock proceeds.

LTC, LTV, and refinance risk

Construction loans size to LTC and stress-test against a completed LTV. If costs come in on budget but the market drops, completed appraisal may not support a takeout permanent loan at the original LTC — the developer has to bring more equity to close the refinance. Sensible sponsors model the refinance under multiple exit-cap and rent scenarios during acquisition, not at construction completion. If a 15% drop in market rent kills the refinance, the deal is fragile even before construction starts. LTC without an LTV stress test isn't underwriting; it's optimism.

Worked Example

Example: Total project cost $12M (land $2.5M, hard $8M, soft $1M, contingency $0.5M). Lender offers $8.4M loan. LTC = 8.4 ÷ 12 = 70%. Sponsor and LPs bring $3.6M equity.

Common Mistakes

• Excluding soft costs and interest reserve from total project cost. • Using purchase price instead of full basis when there's rehab. • Not stress-testing LTC against a lender-required cost overrun contingency. • Assuming LTV won't limit loan size on completion.

How It Works

Step 1 — LTC = (Loan Amount ÷ Total Project Cost) × 100.
Step 2 — Total Project Cost includes land, hard costs, soft costs, contingency, and financing costs.
Step 3 — Construction lenders typically max out at 60–75% LTC.

Frequently Asked Questions

What is a good LTC ratio?: 60–70% is bank standard for construction. Higher LTC (75–85%) is available from non-bank lenders and HUD programs but priced higher.
LTC or LTV — which do lenders use?: Construction lenders use both. LTC constrains during construction; LTV constrains against completed value. The loan is sized by the more restrictive of the two.
What's included in project cost?: Land, hard costs, soft costs, financing costs, and contingency. Everything to reach certificate of occupancy.
Can LTC be over 100%?: In rare 'stretch' financings, yes — but it means the loan covers cost plus some working capital or refinance premium. Uncommon and expensive.

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