Loan-to-Cost vs Loan-to-Value on an Apartment Deal
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Loan-to-value (LTV) is the loan divided by the property's value. Loan-to-cost (LTC) is the loan divided by the total cost of the project: the purchase price plus renovation budget, closing costs and reserves. Agency lenders usually size a loan on value. Bridge and construction lenders often size it on cost. Many lenders apply both and lend the lesser amount. The answer matters to a sponsor because every dollar the lender does not lend is a dollar of equity you have to raise. DoorRaise helps sponsors raise that equity, and this post shows how the lender math sets the number.
This post is part of our guide to real estate syndication. It sits next to debt yield, bridge vs. agency loans and sources and uses. Lender programs change. Information is as of October 2026.
What are the formulas?
LTV = loan amount / value of the property
LTC = loan amount / total project cost
Value is usually the appraised value or the purchase price, whichever the lender says controls (often the lower). Total project cost is the purchase price plus planned renovation, closing costs, fees, interest reserves and other costs the lender counts. Ask the lender exactly what it counts as cost.
Lenders also use LTARV (loan to after-repair value) on value-add loans, which measures the loan against the expected value once the work is done. That value is an estimate.
A worked value-add example (made-up numbers)
A sponsor will buy an apartment building and renovate it.
| Item | Amount |
|---|---|
| Purchase price | $10,000,000 |
| Renovation budget | $1,500,000 |
| Closing costs, fees and reserves | $500,000 |
| Total project cost | $12,000,000 |
| As-is appraised value | $10,200,000 |
The lender offers a maximum of 75% LTC and 70% LTV on the as-is value. It lends the lesser of the two results.
| Test | Calculation | Maximum loan |
|---|---|---|
| LTC | 75% x $12,000,000 | $9,000,000 |
| LTV | 70% x $10,200,000 | $7,140,000 |
| Loan (lesser of the two) | $7,140,000 |
The equity needed is $12,000,000 - $7,140,000 = $4,860,000, plus any lender holdbacks. If the LTV test were 80%, the LTV cap would be $8,160,000 and equity would be $3,840,000. A single lender term moves the raise by about $1,000,000. These numbers are made up to show the steps.
Many bridge lenders fund renovation costs in later draws after the work is done. In that case, you may need to have the cash up front. Ask how the lender funds the capex.
Which lenders use which?
| Loan type | Common sizing focus | Also tested |
|---|---|---|
| Agency (Fannie Mae, Freddie Mac) | Value (LTV) and income | DSCR and, at some lenders, debt yield |
| HUD | Value and income, with its own rules | DSCR |
| Bridge | Cost (LTC) and after-repair value | Debt yield, interest reserve |
| Construction | Cost (LTC) | Value on completion |
| Bank or credit union | Value (LTV) | DSCR, borrower strength |
Each program publishes its own limits and changes them. Check the current terms. Fannie Mae and Freddie Mac post program details; see the Fannie Mae conventional properties fact sheet and Freddie Mac conventional small balance loans.
Does more leverage mean better returns?
More debt can raise the equity return when the deal goes well, but it also raises the monthly payment, lowers coverage and leaves less room if rents or occupancy fall. A deal with too much debt can fail a loan test or run out of cash. Investors should see the loan terms, the coverage at closing and what happens if rates change. See interest rate caps on floating-rate loans and multifamily DSCR loans.
What should you do before you set your equity raise?
- Get written terms from at least two lenders or one broker. Ask for the LTV, LTC and any other tests.
- Ask what counts as cost, and how renovation funds are released.
- Run the lesser-of math on both tests.
- Add reserves and the costs of the equity raise itself to your sources and uses.
- Test the deal at a higher rate and lower rents. See multifamily underwriting basics.
- Set your minimum and maximum raise from the result. See minimum raise and partial closing.
How DoorRaise fits in
DoorRaise is a technology platform, not a law firm, broker-dealer, investment adviser or funding portal, and it does not hold investor money. It does not arrange loans. Once a sponsor knows the equity needed, the platform generates the offering documents, runs e-signatures and accredited investor checks, tracks wires into escrow at Enterprise Bank & Trust, and files the Form D and state notices. Fees are $1,500 to set up (non-refundable), then $5,000 a year from closing (only if the deal closes). See how it works.
Raise your apartment deal from the people who already follow you.
DoorRaise is built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.
To raise the equity for your deal, create your sponsor page.
FAQ
What is the difference between LTC and LTV?
LTV measures the loan against the property's value. LTC measures it against the total cost of buying and improving the property.
Which is more important for a bridge loan?
Bridge lenders usually look at cost and expected value after the work, along with debt yield or coverage. Ask each lender for its tests.
Does the lender use purchase price or appraisal for LTV?
Often the lower of the two, but it depends on the lender and program. Ask which controls.
Is a higher LTV better?
Not necessarily. A higher LTV means less equity but a larger payment and thinner cushion. It also needs to meet the lender's income tests.
How does LTC affect my equity raise?
The loan cap sets how much of the total cost the equity must fund. A lower cap means more equity for the same project.
Sources
- Fannie Mae Multifamily: Conventional properties fact sheet
- Freddie Mac Multifamily: Conventional small balance loans
- HUD: Multifamily Accelerated Processing (MAP) Guide (PDF)
This post is general information as of October 2026, not legal, tax or investment advice. Lender terms change; talk to your own lender and advisers. The examples are simplified illustrations with made-up numbers, not a projection or an offer. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.