Glossary

Loan to cost ratio (LTC)

What loan to cost (LTC) means in development finance, how it differs from LVR, and which ratio actually caps a construction facility.

Loan to cost ratio, or LTC, measures a facility against the total cost of a project — land, construction, professional fees and contingency — rather than against the finished value that loan-to-value uses. On a construction or development deal a lender typically calculates both LTC and LVR against as-complete value, and lends to whichever produces the lower, more conservative figure, so a developer with a strong margin can still find the facility capped by cost rather than value. Borrowers who under-estimate holding costs or contingency often find their effective LTC higher than expected once genuine project costs are tallied. Private lenders and specialist funds active in development finance generally extend LTC further than banks, sometimes toward the 80–90% of cost range, reflecting their comfort assessing feasibility rather than relying purely on a completed valuation.

Related

Construction finance · LVR · GRV

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