LTC / LTV Calculator

Two leverage tests, one loan

Every commercial loan is sized against more than one leverage test, and the two that matter most are loan-to-value and loan-to-cost. They look almost identical — a loan divided by a big number — but they answer different questions, and on the deals where they diverge, knowing which one binds is the difference between the proceeds you priced into your model and the smaller loan you actually get.

The two formulas

Loan-to-value (LTV) = loan ÷ property value. It asks how much you're borrowing against what the asset is worth, and it protects the lender from a borrower overpaying relative to the market. For stabilized commercial real estate, LTV ceilings typically run 60–75%, lower for riskier assets.

Loan-to-cost (LTC) = loan ÷ total project cost — purchase price plus every dollar of capex, closing, and carry. It asks how much you're borrowing against what the deal actually costs, and it keeps the sponsor's equity meaningfully in the deal through the riskiest phase, the renovation or build. Construction and bridge lenders size to LTC, commonly in the 65–75% range.

The lesser-of rule: which one binds

Here's the part that decides your proceeds: most lenders underwrite to the lower of the two implied loans. They compute the maximum loan LTV allows (ceiling × value) and the maximum LTC allows (ceiling × cost), and lend the smaller. With comparable ceilings, that means the higher ratio is the binding constraint — because the higher ratio sits against the smaller denominator, which caps the loan first. On a stabilized purchase where cost and value are close, the two barely differ. On a value-add or development deal they diverge sharply, and an LTV-passing loan can still get cut down by the LTC ceiling (or vice versa). The calculator above shows both ratios and flags which one binds, so you're never surprised at term-sheet time.

A worked example

Take a $7,000,000 loan on a deal that costs $10,000,000 all-in against a $9,500,000 value. LTC is 70.0% (7.0 ÷ 10.0); LTV is 73.7% (7.0 ÷ 9.5). The LTV ratio is higher, because value is the smaller denominator — so LTV is the binding constraint, and at a common ~75% ceiling it's the test that would cap the loan first. Flip the relationship — a deal that costs less than it's worth, the classic value-add where you create value above cost — and LTC becomes the higher ratio and the binding test. The point isn't which one is "usually" binding; it's that you have to compute both on every deal, because the binder flips with the cost-versus-value relationship.

What is a good LTC or LTV?

Lower is safer and higher is more capital-efficient, so "good" depends on which side of the table you're on and how risky the asset is. As a frame: stabilized core deals commonly clear at 60–70% leverage; value-add and bridge deals push to 70–75% on the binding test; above ~75–80% you're above standard ceilings and need a strong story — credit, location, sponsor track record — or you bring more equity. And leverage rarely binds alone: lenders also test DSCR and debt yield, and lend the smallest loan any of the four tests allows. A loan that clears LTV and LTC can still be sized down by coverage.

Read the full loan-to-cost and loan-to-value definitions and the LTV vs LTC guide, check coverage on the DSCR calculator, see the full loan-sizing stack on the metrics hub, and size the debt on your own deal in UpsideIQ. See pricing.