LTV vs. LTC vs. LTARV: Three Ratios That Size Your Flip Loan

Each ratio compares your loan to a different number. Loan-to-value (LTV) uses what the property is worth today. Loan-to-cost (LTC) uses what the whole project costs you. LTARV, short for loan-to-ARV, uses the after-repair value (ARV): what it should be worth once the work is done. Lenders often run all three and lend the smallest result.

The three in one line each

• LTV: loan divided by current, as-is value.
• LTC: loan divided by total project cost, usually purchase price plus renovation budget.
• LTARV: loan divided by the estimated after-repair value (ARV).

Same loan, three denominators, three different percentages.

Why lenders use more than one

Each ratio protects the lender from a different mistake.

LTV asks whether there's enough value in the property today if the project stalls. LTC asks how much of your own money is in the deal. LTARV asks whether the finished house supports the debt. A deal can pass one test and fail another.

Worked example

Example: You find a house with an as-is value of $220,000. You'll buy it for $200,000 and spend $80,000 on renovation. Total cost: $280,000. Projected ARV: $400,000.

Say a lender's limits were 85% LTC and 70% LTARV (illustrative only):

• 85% of $280,000 cost = $238,000
• 70% of $400,000 ARV = $280,000

The lower figure, $238,000, is the likely maximum loan. You'd fund the remaining $42,000 of project cost, plus closing costs, from your own cash. The ARV test had room to spare. The cost test is what capped you.

RSC Private Lending's Fix & Flip loans go up to 95% LTV on the purchase, 100% of rehab, 95% of total cost (LTC) and 75% of ARV. Reaching 95% of total cost on a light rehab requires 3+ completed projects.

Which ratio drives which loan

As a general pattern:

• Fix & Flip and New Construction: LTC and LTARV usually decide the loan size.
• Bridge: as-is LTV tends to be the main measure, since there's little or no rehab.
• DSCR rental loans: LTV plus the rent-to-payment ratio.

Lenders vary, so ask which test is binding for your deal.

Common mix-ups

• A bigger ARV doesn't always mean a bigger loan. If LTC is the binding limit, extra ARV doesn't help.
• Raising your rehab budget doesn't automatically raise the loan in proportion. The lender still caps against value.
• Not every cost counts toward LTC. Some lenders exclude closing costs or soft costs.

What this means for you

Before you make an offer, run all three ratios yourself. The lowest one tells you roughly what the loan will be and how much cash you need. No surprise at the term sheet.

Want to see which ratio limits your next flip? Send RSC Private Lending your numbers for a term sheet in 24 hours. Subject to underwriting.