LTV. LTC. ARV. Every lender uses these terms, and most borrowers nod along without a firm understanding of exactly what each means and how it affects their deal. Let's fix that.
LTV: Loan-to-Value
LTV is the most basic leverage metric: loan amount ÷ appraised value of the property. If you borrow $300K on a property worth $400K, your LTV is 75%. LTV is used primarily on stabilized property — DSCR loans, bridge loans on existing properties, cash-out refinances. The lower the LTV, the lower the rate and the less risk to the lender.
LTC: Loan-to-Cost
LTC is used on acquisition + renovation financing. Loan amount ÷ total project cost (purchase price + rehab budget). If you buy a property for $200K, plan $80K in rehab, and the lender lends you $252K, your LTC is 90% ($252K ÷ $280K). LTC is the relevant metric on fix & flip and construction loans because the current appraised value is much lower than the projected completed value.
ARV: After-Repair Value
ARV is the projected value of the property after all renovations are complete. It's an estimate based on comparable sales of renovated properties in the same area and condition. Lenders will lend a percentage of ARV — typically 65–75% — to ensure they're protected even if the market moves or the renovation comes in over budget. If ARV is $500K and the lender caps at 70% ARV, max loan is $350K.
How They Work Together
On a fix & flip deal, the lender may look at all three: 90% LTC ($252K on $280K cost), 70% ARV ($350K on $500K ARV), and 75% as-is LTV ($150K on $200K as-is value). The loan is capped at the lowest of these constraints. Understanding which constraint limits your loan helps you structure deals that maximize leverage.
