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Loan to Cost (LTC)

Loan to cost is the ratio of the maximum loanable amount over the cost of a real estate property or project.

For example, assume an investor has the opportunity to purchase a property for $100,000 which will require $20,000 in repairs before occupancy by a tenant. If a lender will lend at a loan to cost ratio of 75%, the investor will be able to borrow up to 75% of the total cost of $120,000 or $90,000. The investor will have to pay for the remaining $30,000 by some other means – usually with cash.