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Loan-to-Cost Ratio Calculator

Find the loan-to-cost ratio of a project.

How it is calculated

The ratio is LTC = loan ÷ total cost × 100. Both loan (the amount borrowed) and cost (the total project budget) must be in the same currency; the result is a percentage rounded to two decimals. Total cost should include everything the budget contains: land, construction (hard costs), fees and financing (soft costs) and any contingency. The tool needs a cost above zero and a loan of zero or more, otherwise it returns nothing. It does not cap the result at 100%, so a loan larger than the cost simply shows a value above 100%. Maximum acceptable LTC levels are set by each lender and differ by country, loan type and project, so compare the figure with your lender's terms.

Worked example

A developer budgets 4,500,000 in total cost and asks for a loan of 3,200,000. Divide the loan by the cost: 3,200,000 ÷ 4,500,000 = 0.7111. Multiply by 100 to get 71.11%. The remaining 28.89% of the cost (1,300,000) must come from the developer's own equity.

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Common mistakes

  • Using the finished property's expected value in the cost field. That gives loan-to-value, a different ratio; LTC uses what the project costs to build.
  • Leaving out soft costs, contingency or interest reserve from total cost, which makes the cost too low and the LTC look higher than the lender's figure.
  • Mixing currencies or units, such as a loan in thousands and a cost in full amounts.
  • Entering the equity amount instead of the loan; the first field is the borrowed sum, not your contribution.
  • Reading a result above 100% as an error in the tool: it means the loan exceeds the stated cost, so check the inputs.

Sources

About this calculator

The loan-to-cost (LTC) ratio — loan amount ÷ total project cost × 100 — measures how much of a construction or development project's full cost (land, hard costs, soft costs, contingency) a lender is willing to finance, as opposed to loan-to-value (LTV), which compares the loan to the property's finished appraised value.

Construction lenders use LTC to cap risk during the build phase, when there's no finished, income-producing asset to appraise yet — typical ceilings run around 75-80%, with the developer covering the rest as equity. Real estate developers, construction lenders, and investors evaluating a ground-up deal check LTC alongside LTV and loan-to-ARV (after-repair value) to size financing and gauge how much skin the developer has in the game.

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Comments (1)

  • Editorial team

    Lenders do not always define cost the same way. If you already own the land, one may count it at what you paid, another at today's value, and a third may leave it out, which changes the ratio noticeably. Ask which basis applies before comparing the result with a term sheet. To work backwards, multiply total cost by the ratio the lender allows to see the largest loan. Which items did your lender include in the cost figure?

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