Ask a first-time flipper how much they can borrow and most will quote a single percentage — "the lender does 90%." Ninety percent of what, though, is the part that trips people up. Hard money lenders don't size your loan off one number; they run it against three, and your actual loan amount is set by whichever one is tightest. Here's how LTC, LTV, and ARV each work, and why knowing all three before you make an offer keeps you from underwriting a deal that doesn't actually pencil.
The Three Numbers, Defined
LTC — Loan-to-Cost. The loan amount as a percentage of your total project cost, meaning purchase price plus rehab budget combined. Most fix and flip lenders cap LTC somewhere in the 85%-90% range.
LTV — Loan-to-Value. The loan amount as a percentage of the property's current, as-is value — what it's worth today, before any renovation work happens.
ARV — After-Repair Value (used as LTARV). The loan amount as a percentage of what the property will be worth once the renovation is complete. Because ARV is a projection rather than today's value, lenders cap loans against it more conservatively, typically in the 65%-75% range.
LTC = Loan Amount ÷ (Purchase Price + Rehab Budget)
LTARV = Loan Amount ÷ After-Repair Value
Why Lenders Use All Three at Once
Each ratio protects the lender against a different risk. LTC controls how much skin you have in the deal relative to total cost. LTV controls exposure against the property as it actually sits today, in case the renovation stalls. LTARV controls exposure against a value that hasn't been proven yet — the appraiser's opinion of what the finished product will sell for. A lender doesn't pick whichever of these is most generous; they run all of them and cap your loan at whichever produces the lowest number. That's the constraint that actually matters when you're sizing a deal.
A Worked Example
Say you're underwriting a deal with a $220,000 purchase price and a $60,000 rehab budget, for a total project cost of $280,000. A comparable-sales-supported ARV comes in at $340,000.
| 90% LTC cap | 90% × $280,000 total cost = $252,000 maximum loan |
|---|---|
| 70% LTARV cap | 70% × $340,000 ARV = $238,000 maximum loan |
| Actual loan amount | $238,000 — the lower of the two figures governs |
Even though the LTC math alone would allow $252,000, the ARV cap is the binding constraint here, so the lender caps the loan at $238,000. That leaves the borrower needing to cover $42,000 of the $280,000 total project cost out of pocket — roughly 15%, not the 10% that "90% LTC" alone would suggest. This is the single most common miscalculation new investors make when they estimate their required down payment off just one ratio.
How to Use These Numbers When Sizing a Deal
- Pull real, closed comparable sales for your ARV estimate — not an optimistic Zillow number or a listing agent's opinion
- Get a firm, itemized contractor quote for the rehab budget before you make an offer, not a rough guess
- Ask your lender for their exact LTC and LTARV caps up front, since they vary by lender and sometimes by property type
- Run your numbers against the lower of the LTC and LTARV outcomes, not whichever one is more flattering
- Size your required down payment off that binding constraint so you're not caught short at the closing table
The Bottom Line
LTC, LTV, and ARV aren't competing definitions of the same thing — they're three separate checks a lender runs on the same deal, and your loan amount comes from whichever one is tightest. Run all three before you're under contract, and you'll know your real down payment number instead of finding out at closing.