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Loan-to-cost calculator, with LTV beside it
Loan-to-cost divides the loan by what the project costs, purchase price plus renovation budget. Loan-to-value divides the same loan by what the finished property is worth. Construction, value-add and fix-and-flip lenders quote a cap on each and lend the smaller result, so the governing test sets how much equity you bring.
What are loan-to-cost and loan-to-value on a sample renovation?
| Input | Value |
|---|---|
| Purchase price | $2,500,000 |
| Renovation budget | $500,000 |
| Target loan amount | $2,100,000 |
| Stabilized value | $3,500,000 |
| LTC cap | 70.00% |
| LTV cap | 65.00% |
Loan-to-cost70.00%
- Total project cost: $2,500,000 purchase + $500,000 renovation = $3,000,000.
- Loan-to-cost: $2,100,000 ÷ $3,000,000 = 70.00%.
- Loan-to-value against the $3,500,000 stabilized value: $2,100,000 ÷ $3,500,000 = 60.00%.
- Lesser of the two caps: a 70% LTC cap allows $2,100,000 and a 65% LTV cap allows $2,275,000, so cost governs at $2,100,000.
The loan sits at the cost cap and well inside the value cap, so equity is the full 30% of cost, $900,000. A stronger appraisal would not lower it; a smaller budget or a higher cost cap would.
How are loan-to-cost and loan-to-value calculated?
LTC = Target loan amount ÷ Total project cost LTV = Target loan amount ÷ Stabilized value
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How do you read the result?
Loan-to-cost puts sponsor equity into a project whose value is still a projection; loan-to-value limits the loan to a share of the finished value. Bought well below finished value, the value test is loose and cost governs. Bought at full price, value can govern.
When cost governs, only a smaller budget or a higher cost cap raises the loan, and a better appraisal changes nothing. When value governs, the appraisal is the negotiation.
Frequently asked questions
What belongs in total project cost?
Here, the purchase price plus the hard renovation budget, the usual basis for fix-and-flip and bridge loans. Construction lenders usually count soft costs, fees and the interest reserve in total cost as well, which raises the loan a cost cap allows, so agree the sources and uses early.
Does the renovation holdback count as loan amount?
Usually. Renovation loans are commonly quoted as the total commitment, the day-one advance plus the holdback released in draws, with both caps measured against it; confirm on your term sheet which figure the caps apply to.
Can I count sweat equity or a below-market purchase as equity?
Usually not for the cost test, which counts cash paid and to be paid. A below-market purchase does help the value test, and some lenders size the value leg on the appraisal after a seasoning period.
How does after-repair value fit in?
After-repair value is the finished value the loan-to-value cap applies to on fix-and-flip and bridge loans. Because it is a forecast, lenders often discount it more than a stabilized appraisal, and some size on cost alone until the work is done.
What does YieldStack do?
YieldStack is a commercial mortgage brokerage. Every term sheet comes from a lender in the network and is subject to that lender's underwriting.
Does it cost anything to see terms?
No. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
Is financing guaranteed?
No. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Where does YieldStack operate?
Nationwide. YieldStack arranges commercial real estate financing nationwide. Every deal is business-purpose commercial financing, and the broker fee is paid only at closing.
Bring the number to lenders.Compare the terms they send.
YieldStack is a commercial mortgage brokerage.