LTC, LTV, and ARV are the three numbers lenders use to cap how much they'll lend on an investment property. LTC (loan-to-cost) compares the loan to what you're spending on the project. LTV (loan-to-value) compares it to what the property is worth today. ARV (after-repair value) is what it'll be worth once the work is done — and lenders cap the loan at a percentage of that too. When a lender uses more than one, you get the lowest resulting loan amount.
Understand those three and you'll know how much cash a deal needs before you make the offer.
LTC: loan-to-cost
LTC = loan amount ÷ total project cost
Total project cost is usually the purchase price plus the rehab or construction budget. LTC tells you what share of your spending the lender will cover. The rest is your cash.
Example: you buy a house for $200,000 and budget $60,000 for the rehab. Total cost is $260,000. At 90% LTC — our fix and flip maximum — the loan could be up to $234,000 — on the cost test alone.
LTC shows up mostly on short-term loans where you're spending money to create value:
| Program | Max LTC |
|---|---|
| Fix & Flip | 90% |
| Ground-Up Construction | 85% of project |
| Stabilized Bridge | 85% |
LTV: loan-to-value
LTV = loan amount ÷ current appraised value
LTV compares the loan to what the property is worth now, according to the appraisal. It's the main test on long-term rental loans and refinances, where the property is already in its finished state.
Example: a rental appraises at $300,000. At 80% LTV — our DSCR rental loan maximum for purchases and rate-and-term refis — the loan could be up to $240,000. On a cash-out refinance, where our limit is up to 75%, it's up to $225,000.
One wrinkle: on a purchase, many lenders use the lower of the purchase price and the appraised value. Buying below appraisal doesn't automatically let you borrow against the higher number.
ARV: after-repair value
ARV isn't a ratio — it's a value. It's what the appraiser expects the property to be worth after the planned work is complete, based on comparable sales of renovated properties nearby.
Lenders turn ARV into a limit with a ratio, usually called ARLTV (after-repair loan-to-value) or LTARV (loan-to-ARV). Same idea, different acronym:
ARLTV = loan amount ÷ after-repair value
| Program | After-repair limit |
|---|---|
| Fix & Flip | 75% of ARV |
| Ground-Up Construction | 70% of completed value |
The ARV limit is the lender's safety net. If the project goes sideways and the lender ends up owning the property, it wants the loan to be comfortably below what the finished property would sell for.
Why the lowest number wins
When a program has both an LTC and an ARV limit, the lender calculates both and lends the lower one. That's the part that surprises new investors.
Example 1: the cost test wins
- Purchase $200,000 + rehab $60,000 = $260,000 total cost
- ARV $350,000
| Test | Math | Loan |
|---|---|---|
| 90% of cost | $260,000 × 90% | $234,000 |
| 75% of ARV | $350,000 × 75% | $262,500 |
| Maximum loan | lower of the two | $234,000 |
You bring the difference between cost and loan — $26,000 — plus closing costs, points, and reserves.
Example 2: the ARV test wins
Same purchase and rehab, but the comps only support an ARV of $300,000.
| Test | Math | Loan |
|---|---|---|
| 90% of cost | $260,000 × 90% | $234,000 |
| 75% of ARV | $300,000 × 75% | $225,000 |
| Maximum loan | lower of the two | $225,000 |
Now you're bringing $35,000 instead. Nothing about the purchase or the rehab changed. The thinner margin changed the loan.
That's the real lesson: when the ARV test is the one that binds, the deal is telling you the margin is thin. A lender capping your loan isn't being difficult — it's flagging the same risk you're taking.
Which number matters for which loan
| If you're… | The limit that usually matters |
|---|---|
| Flipping a house | LTC and ARV — whichever is lower |
| Building from the ground up | LTC and completed value |
| Buying or refinancing a rental | LTV (and the property's DSCR) |
| Using a bridge loan on a stabilized property | LTC and LTV |
| Doing a BRRRR | LTC/ARV on the way in, LTV on the refinance out |
For BRRRR investors, the refinance LTV is what decides how much cash comes back. See BRRRR financing.
How to use these numbers before you make an offer
- Start with a conservative ARV. Use the comps an appraiser would pick, not the best sale on the street.
- Run both tests. Cost × LTC and ARV × ARLTV. Take the lower one.
- Subtract from your total cost. That's your minimum cash in, before closing costs, points, holding costs, and reserves.
- Work backward if you need to. If the cash required is more than you have, the purchase price has to come down or the deal isn't the one.
The fix and flip calculator does all four steps at once.
How these limits show up on a term sheet
When you get real terms from a lender, the leverage limits usually show up as a loan amount and a few percentages, not as the full math. Here's how to read them:
- "Loan amount: $X" is the result of all the tests above, after the appraisal. It can come in lower than your own estimate if the appraised value or ARV comes in lower.
- "Initial advance" and "rehab holdback" (or similar language) split a flip or construction loan into the money you get at closing and the money held back for the work. The holdback is released in draws as the work is completed.
- "LTV" on a refinance tells you how the loan compares to the new appraised value. On a cash-out refinance, the limit is usually lower than on a purchase or rate-and-term refi.
Your credit, experience, and the property can all move you below a program's maximum. If a quote comes in lower than you expected, ask which test is binding. The answer tells you what would change it: a lower price, a bigger down payment, a stronger ARV, or more rent.
Common mistakes
- Assuming the lender uses the bigger number. It's always the smaller one.
- Confusing LTV with ARLTV. One is today's value; one is after the work.
- Forgetting that rehab is part of cost. LTC applies to purchase plus rehab.
- Treating the max as the plan. Program maximums are ceilings, not promises. Your credit, experience, and the property can all affect where your deal lands.
Have a deal and want the real numbers? Send it to us and we'll tell you straight how it sizes up.
Business-purpose, non-owner-occupied only; entity borrowers (LLC or corporation) required; full recourse. Rates shown are the lowest offered and depend on borrower FICO, experience, and the deal. Points and fees vary. *Stabilized Bridge offers a no-DSCR option for properties listed for sale and a 1.10x exit-DSCR option for rent-ready properties. Not available in every state. Nothing here is a commitment to lend or an offer of specific terms; all loans subject to underwriting and approval.