If you’re building in Texas, knowing the difference between LTC and LTV could make or break your deal.
Understanding the financing behind a build is just as important as pouring the slab. And when it comes to construction lending, two terms come up over and over again: Loan-to-Cost (LTC) and Loan-to-Value (LTV). They sound similar. But what they measure and how lenders use them is very different.
In this guide, we’ll break down loan to cost vs loan to value, explain how they affect your next project, and help you figure out which metric you should really be tracking.
What Is Loan-to-Cost (LTC)?
Loan-to-Cost (LTC) is a ratio that compares the amount of money a lender will provide to the actual cost of the project. That includes land acquisition, permits, construction materials, labor — everything it takes to build.
Example:
If your total project cost is $1,000,000 and your lender agrees to fund $800,000, your LTC is 80%.
In the world of LTC real estate, this number helps lenders determine how much skin you have in the game. A lower LTC usually means you’re putting in more of your own capital, which lenders like because it shows commitment and reduces their risk.
What Is Loan-to-Value (LTV)?
Loan-to-Value (LTV) compares the loan amount to the projected after-completion value (also known as the ARV — after repair value). It looks at what the property will be worth when it’s finished, not what it costs to build.
Example:
If the ARV of your finished project is $1,500,000 and you’re borrowing $900,000, your LTV is 60%.
In LTV real estate, this is especially useful for longer-term financing or refinancing once the project is stabilized. But for new construction, it doesn’t always give a full picture of the risk and investment involved.
LTC vs. LTV in Construction Loans: Why It Matters
When you’re comparing LTC vs LTV construction loans, it’s critical to understand what each number tells you and what it tells your lender.
- LTC is about cost control and commitment
- LTV is about end value and equity
For ground-up builds, real estate construction loans usually rely more heavily on LTC because they reflect the actual dollars required to get the project done. A lender may look at both, but if the costs are too high relative to the value, you might not get full leverage, or you may need to bring more capital to the table.
What Private Lenders Are Really Looking For
Traditional banks tend to focus more on LTV, but private construction loan terms often lean toward LTC. Why? Because private lenders are funding your project based on how efficiently you can build, not just what it’s worth in the future.
Avondale, for example, typically structures deals around LTC ratios that reflect both the scope of the project and the builder’s track record. That means you’ll get faster decisions, more flexible terms, and a lender that’s aligned with how builders actually work.
This is especially important in builder financing in Texas, where land prices, labor rates, and permitting delays can shift project costs fast. Having a lender that understands both LTC and LTV and when to prioritize each is key.
Which Metric Should You Track Closely?
Here’s the short answer: track both, but know when each matters.
- Track LTC while budgeting, securing financing, and estimating capital needed.
- Track LTV when planning your exit — whether it’s a sale or refi.
Understanding your construction loan metrics will help you plan more accurately, negotiate better terms, and avoid surprises halfway through your build.
And if you’re working with a private lender, knowing your numbers builds credibility. It shows you’re serious, organized, and aware of your project’s risk profile.
Real-World Example
Let’s say you’re building a four-unit townhouse project in Dallas.
- Total cost to build: $1.2 million
- Projected ARV: $1.8 million
- Loan amount offered: $960,000
That puts your LTC at 80% and LTV at 53%.
In this case, the lender sees strong equity (low LTV) and moderate borrower exposure (80% LTC). A lender like Avondale would likely move forward, especially if you’ve delivered similar projects before.
LTC Is the Builder’s Metric
If you’re in the middle of a ground-up build, LTC is your lifeline. It tells you how much capital you need, how far your loan will stretch, and how to plan your cash flow.
LTV still matters, but more on the back end — when you’re selling, refinancing, or raising more capital.
For builders in Texas working on tight timelines, changing material costs, and evolving markets, loan to cost vs loan to value isn’t just a technical distinction; it’s a strategy.
Work With a Lender That Understands Both
At Avondale Private Lending, we’ve funded over 750 deals across Texas, and we know how to balance LTC vs. LTV construction loans to fit your goals.
Whether you’re building a duplex in Austin, townhomes in Dallas, or an infill project in San Antonio, we structure private construction loan terms around your reality, not a checklist.
Need help navigating real estate construction loans or working out your numbers? Reach out. We speak builder.