LTV [Loan-to-Value] and LTC [Loan-to-Cost] are the leverage metrics that drive risk, pricing, and approval.
LTV compares your loan amount to a value number, such as as-is value or ARV [After Repair Value].
LTC compares your loan amount to your total cost basis, typically purchase plus rehab.
Investors win by knowing which metric a lender is using for that product and deal type.
If you plan leverage wrong, you can run out of cash mid-project or fail to refinance cleanly.
Use this guide to structure leverage so the project completes and exits without drama.
At a glance
- LTV [Loan-to-Value] is value-based leverage
- LTC [Loan-to-Cost] is cost-based leverage
- ARV [After Repair Value] LTV is common in flips, but must be realistic
- Lower leverage usually reduces friction and improves reliability
- Your cash buffer should cover overruns and delays
- Refinance exits require conservative leverage planning
Definitions in plain English
LTV [Loan-to-Value] asks: how big is the loan compared to what the property is worth?
LTC [Loan-to-Cost] asks: how big is the loan compared to what you are all-in for?
A simple example (so you don’t mis-model your cash)
- Purchase price: 200,000
- Rehab budget: 50,000
- Total cost basis: 250,000
- ARV [After Repair Value] estimate: 320,000
If the loan is 200,000:
- LTC [Loan-to-Cost] = 200,000 / 250,000 = 0.80
- LTV [Loan-to-Value] using ARV = 200,000 / 320,000 = 0.625
Same loan, two different leverage pictures. This is why investors get surprised when they only model one metric.
Why lenders care
- Higher leverage means less equity cushion if the market softens.
- Equity cushion is the first line of protection if the exit stalls.
- Leverage also predicts how “workout-proof” a deal is if timelines slip.
Investor rule of thumb
Plan your deal so you can finish the rehab without counting on perfect timing. If the deal needs everything to go right to survive, leverage is too high. Conservative leverage gives you options: extend, adjust pricing, rent instead of sell, or refinance without panic.
Common leverage traps
- Assuming ARV [After Repair Value] will be accepted without strong comps
- Ignoring closing costs and holding costs in your all-in basis
- Underestimating rehab and needing emergency cash mid-project
Next step
Hard money program: https://ambitionlending.co/hard-money-loans/
Fix and flip program: https://ambitionlending.co/fix-flip-loans/
Submit a deal: https://ambitionlending.co/contact/
Frequently Asked Questions
What is LTV [Loan-to-Value]?
LTV is the loan amount divided by the value used in underwriting, such as as-is value or ARV, depending on the program.
What is LTC [Loan-to-Cost]?
LTC is the loan amount divided by total cost basis, typically purchase plus rehab.
Which matters more for fix and flips?
Both matter. Many flip structures are value-based, but lenders also consider cost and execution risk.
Why does leverage affect pricing?
Higher leverage reduces equity cushion, increasing downside risk and often increasing pricing and conditions.
Can leverage change after valuation?
Yes. If value comes in lower than expected, leverage increases and terms may adjust.
How should I plan leverage for refinance?
Plan conservatively. Long-term refinance programs often have different leverage constraints than short-term loans.
Hard Money Loans: https://ambitionlending.co/hard-money-loans/
Fix & Flip Loans: https://ambitionlending.co/fix-flip-loans/
Contact: https://ambitionlending.co/
