Tap to get financing
Nasdaq: JNVRCommercial Real Estate Loans
Loan Options
Permanent FinancingLoans Under $1MBridge LoansMezzanine FinancingConstruction LoansUSDA 538 Loan ProgramLife Company LoansSBA 7(a) LoansSBA 504 Loan ProgramFannie Mae LoansFreddie Mac LoansCMBS LoansHUD Multifamily LoansFix and Flip LoansHUD 223(f) LoansHUD 221(d)(4) LoansHUD 223(a)(7) LoansHUD 241(a) LoansHUD 232 LoansHUD 232/223(f) LoansHUD 232 LEAN LoansHUD 232/223(a)(7) Loans
Property Types
All Property TypesRetailOfficeIndustrialApartmentsSelf StorageHotelLandChurchSchoolAuto DealershipAuto Repair ShopCar WashGas StationHealthcareMedical OfficeDental OfficeVeterinaryFitness CenterBowling AlleyConvenience StoreDay Care CenterGolf CourseAnchored Strip CenterRestaurantMarinaWarehouseFuneral Home
Resources
BlogCurrent Mortgage RatesForms and TemplatesCommercial Property for SaleCommercial MLS GuideGlossaryVideo LibraryApply OnlineHow to Get a CRE LoanFrequently Asked Questions
Calculators
Commercial Mortgage CalculatorCap Rate CalculatorNOI CalculatorDSCR CalculatorLTV CalculatorLTC CalculatorDebt Yield CalculatorYield Maintenance CalculatorInternal Rate of Return Calculator
About Us
About UsLeadershipTeamContactWe're Hiring
(561) 556-7778 Get financing →
Interest Rates

Today’s rates for a wide range of commercial property and loan types.
Check Today's Rates →

Newly Published
Aug 23 at Commercial Real Estate Loans
New York’s Industrial Properties: Reviewing H1 2023
Aug 2 at Commercial Real Estate Loans
How to Sell a Commercial Property in September 2023
Jun 30 at Commercial Real Estate Loans
The Comprehensive Guide to Industrial Property Financing in 2023
Explore the Janover Network
Sep 29 at SBA 504 Loans
SBA 504 Loans for Preschools and Daycare Centers
Sep 26 at HUD Loans
What Is Fair Market Rent? 2024 FMR Calculator by ZIP
Sep 25 at Multifamily Loans
Multifamily Minute Reader Reflections: How Do You Communicate Rent Increases?
Was This Article Helpful?
Last updated on Oct 24, 2022
2 min read

Loan-to-Cost Ratio Calculator

A helpful tool for the calculation of the loan-to-cost ratio in a commercial real estate transaction.

In this article:
  1. What Is a Loan-to-Cost Ratio?
  2. LTC Calculator
  3. Calculating the Loan-to-Cost Ratio
  4. Usage and Application of the Loan-to-Cost Ratio
  5. Get Financing
Start Your Application and Unlock the Power of Choice Experience expert guidance, competitive options, and unparalleled industry expertise.
Click Here to Get Quotes →
$5.6M offered by a Bank at 6.1%$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1.4M offered by a Credit Union at 6.1%Click Here to Get Quotes!

What Is a Loan-to-Cost Ratio?

The loan-to-cost ratio, or LTC, is a metric used in commercial real estate which represents the ratio of a construction or rehabilitation project's loan amount relative to the total project cost. While these costs vary with every project, some common examples of cost types include:

  • land or property acquisition

  • materials

  • labor

  • insurance

  • Depending on the scope of a project, expenses may also include soft costs such as architectural plans, impact fees, or even finance costs like interest and fees. Lenders consider the loan-to-cost ratio of a project in order to determine the level of risk and the borrower’s leverage in a commercial real estate transaction.

    LTC Calculator

    Calculating the Loan-to-Cost Ratio

    LTC is calculated by dividing the amount of the project loan by the total project cost. The formula for calculating an LTC ratio is:

    LTC = Loan Amount ÷ Total Project Cost

    To illustrate, consider a commercial property rehabilitation project that has a total cost of $4 million and a lender willing to finance $3 million. Simply divide the amount of the loan by the cost of the project, and the LTC ratio comes to 75%

    LTC = $3,000,000 ÷ 4,000,000 = 75%

    Usage and Application of the Loan-to-Cost Ratio

    An LTC ratio is a commonly used metric in commercial lending for value-add acquisitions such as ground-up construction or the acquisition of properties that require substantial rehabilitation. Lenders analyze the LTC ratio of a deal to understand the borrower’s debt in relation to the cost of a project. Unlike with the similar loan-to-value ratio metric, the value of a property has no effect on the LTC. Even so, similar to how LTV is used, the LTC is a valuable factor in the determination of the potential risk in a deal. The general rule of thumb is the lower the leverage, the lower the risk.

    Although many lenders view the LTC ratio as essential for qualifying construction or rehabilitation financing, there are many other factors taken into consideration. These include the location, the financial strength of the borrower, pro forma income and expenses, and the asset class of the collateral property. Additionally, lenders will also review other key metrics in a deal, such as the debt service coverage ratio, the debt yield, and the loan-to-value ratio (of the property’s future stabilized value) before making a financing decision.

    In this article:
    1. What Is a Loan-to-Cost Ratio?
    2. LTC Calculator
    3. Calculating the Loan-to-Cost Ratio
    4. Usage and Application of the Loan-to-Cost Ratio
    5. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

Commercial Real Estate Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487
(561) 556-7778 

hello@commercialrealestate.loans

Commercial Real Estate Loans

Eligible Property Types
Mortgage Rates
Commercial Loan Calculator
Glossary

Site Information

Privacy Policy
Terms of Use

This website is owned by a company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

This website utilizes artificial intelligence technologies to auto-generate responses, which have limitations in accuracy and appropriateness. Users should not rely upon AI-generated content for definitive advice and instead should confirm facts or consult professionals regarding any personal, legal, financial or other matters. The website owner is not responsible for damages allegedly arising from use of this website's AI.

Copyright © 2023 Janover Inc. All rights reserved.