Loan-To-Cost Ratio - LTC

Definition of 'Loan-To-Cost Ratio - LTC'


A ratio used in commercial real estate construction to compare the amount of the loan used to finance a project to the cost to build the project. If the project cost $1 million to complete and the borrower was asking for $800,000, the loan-to-cost (LTC) ratio would be 80%. The costs included in the $1 million cost figure would be land, construction materials, construction labor, professional fees, permits and so on.

Investopedia explains 'Loan-To-Cost Ratio - LTC'


The LTC ratio helps commercial real estate lenders assess the risk of making a construction loan. The higher the LTC ratio, the higher the risk. A similar, commonly used metric, the loan-to-value ratio, compares the amount of the loan to the fair-market value of the project.



comments powered by Disqus
Hot Definitions
  1. Jensen's Measure

    A risk-adjusted performance measure that represents the average return on a portfolio over and above that predicted by the capital asset pricing model (CAPM), given the portfolio's beta and the average market return. This is the portfolio's alpha. In fact, the concept is sometimes referred to as "Jensen's alpha."
  2. Direct Bidder

    An entity that purchases Treasury securities at auction for a house account rather than on behalf of another party.
  3. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes the monthly loan payments affordable.
  4. Leveraged Benefits

    The use – by a business owner or professional practitioner – of their company’s receivables or current income to secure a loan whose proceeds then indirectly fund a retirement plan.
  5. Direct Consolidation Loan

    A loan that combines two or more federal education loans into a single loan. A Direct Consolidation Loan allows the borrower to make a single monthly payment. The loan is facilitated by the U.S. Department of Education and does not require borrowers to pay an application fee.
  6. Through Fund

    A type of target-date retirement fund whose asset allocation includes higher risk and potentially higher return investments "through" the fund's target date and beyond.
Trading Center