What Do LTC and ARV Mean on a Hard Money Loan?

Loan-to-cost compares financed proceeds with the supported acquisition and project cost. It helps show how much borrower capital remains in the transaction and prevents a larger budget from automatically creating larger proceeds.

The Fix & Flip program states 95% LTC plus 100% of rehab. Its typed calculation fields use a 95% purchase advance and 100% rehab funding for the site's illustrative example, subject to the complete structure and underwriting.

Eligible cost is determined during review. Closing costs, points, reserves, carrying costs, and unsupported scope items should not be assumed to increase the cost basis used for proceeds.

See how these limits apply on our fix and flip loans page.

After-repair value is the appraiser's supported opinion of the property's value after the approved work is complete. It is not the investor's target resale price, current value, or a promise about the future market.

The Fix & Flip program has a maximum ARLTV of 75%. That cap compares the loan with supported ARV and can reduce proceeds even when cost-based leverage would allow more.

The appraisal considers the proposed scope and relevant market evidence. If the finished plan, quality, legal use, or comparable support changes, the value conclusion may also change.

The lower limit controls because cost and value measure different risks. LTC limits how much of the project basis is financed. ARLTV limits how much debt depends on the expected finished value.

Illustrative only, not a quote. On a $300,000 purchase with $100,000 in rehab, the cost-based loan is $385,000. On a $550,000 ARV, the cap is $412,500. The lower amount, $385,000, controls.

Borrower cash toward purchase and rehab in that example is $15,000 before closing costs, points, and reserves. Actual proceeds depend on accepted costs, appraisal, and underwriting.

Investors can use both measures before making an offer to test whether purchase price, scope, and expected value leave a workable capital structure. Conservative inputs are more useful than a best-case resale scenario.

Build a line-item budget and separate essential repairs from optional improvements. Compare the finished plan with supportable properties, and leave liquidity for overruns and draw timing.

LTC and ARLTV are limits, not approval by themselves. Borrower strength, property condition, title, insurance, location, and exit also affect the final structure.

Run both calculations when the contract price or scope changes. A higher renovation budget may increase total cost without increasing supported ARV by the same amount, while a lower appraisal can tighten the value cap even when costs remain unchanged.

Use the results to decide whether to renegotiate the purchase, revise the scope, contribute more cash, or reconsider the deal. The calculations are decision tools, not substitutes for appraisal or final underwriting. Recheck them before approving material scope changes or changing the planned exit.