Understanding LTV, ARV, and LTC in Real Estate Lending

If you're exploring private lending options for your next real estate deal, you've probably seen terms like LTV, ARV, and LTC thrown around. These acronyms are more than just industry jargon—they shape what kind of loan you can get and how much risk a lender is taking.

Let's break them down in plain English.

What Is LTV (Loan-to-Value)?

LTV compares the loan amount to the current value of the property.

Formula:

LTV = (Loan Amount ÷ Property Value) x 100

Example:

You're buying a property worth $300,000 and want to borrow $240,000.

LTV = ($240,000 ÷ $300,000) x 100 = 80%

Most lenders, including Alvear Lending, use LTV to determine your maximum loan amount.

Lower LTV = lower risk = better chances of approval.

What Is ARV (After-Repair Value)?

ARV is what the property is expected to be worth after renovations are completed.

If you're fixing up a distressed property, ARV is key to estimating your future equity. Lenders often base loans on a percentage of ARV, especially for fix and flip projects.

Example:

A fixer-upper costs $200,000. After $50,000 in renovations, it's expected to be worth $320,000. That $320K is your ARV.

Alvear Lending's fix and flip loans go up to 75% ARV, which means you could borrow up to $240,000 for the purchase and rehab combined.

What Is LTC (Loan-to-Cost)?

LTC compares the loan amount to your total project cost—purchase price plus renovation expenses.

Formula:

LTC = (Loan Amount ÷ Total Project Cost) x 100

Example:

Buy for $200,000, spend $50,000 on rehab. Total cost = $250,000. If the lender offers $200,000:

LTC = ($200,000 ÷ $250,000) x 100 = 80%

LTC is often used in construction and heavy rehab projects. Alvear Lending's ground-up construction loans, for instance, typically go up to 85% LTC.

Why These Metrics Matter

• LTV tells lenders how much equity is already in the property

• ARV estimates future value, helping justify larger rehab loans

• LTC ensures you’re not overleveraging the project budget

Understanding these terms helps you:

• Craft smarter offers

• Secure better financing

• Avoid overextending yourself

The Bottom Line

Whether you're flipping a house or building from the ground up, knowing how LTV, ARV, and LTC work will help you get funded faster and smarter. At Alvear Lending, we guide real estate investors through every step—from application to closing.

Ready to fund your next project?

Apply today.