Loan-to-Cost (LTC)
The ratio of a construction or development loan amount to the total project cost, used to evaluate how much of a project's cost a lender is willing to finance.
Unlike loan-to-value, which compares a loan to an asset’s finished value, loan-to-cost compares it to the actual cost of construction or acquisition plus improvements, which matters most while a project is still being built and doesn’t yet have a stabilized value.
Lenders typically cap LTC below 100%, requiring the borrower to contribute equity toward the total project cost, which keeps the borrower financially invested in the project’s success.
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