Loan to Cost (LTC)

In an earlier blog we talked about LTV (Loan to Value) which talked about how the relationship between the total amount you are borrowing to the appraised value of the property.  Well today we will be talking about a different relationship between the total amount of your loan to the cost of the property.

Most often used with commercial properties, LTC compares the amount you are wanting to borrow to the cost of the project itself.  For example: If you thought that building a new restaurant would be a great idea and the land was going to cost you $50,000 and then total construction costs were going to be $550,000 then your total cost would be $600,000.  Well, you've been saving for a while and you have $90,000 to invest in your dream.  This means that you still would need to borrow $510,000 and your LTC would be 85%.

There are many factors  as to if a bank or mortgage company would approve a LTC of that percentage.  One thing that they do look at is location.  Not just is it in a good area but how many of what you want to build are there already?  If you are interested in making your dream happen...contact one of our mortgage partners.  In the meantime - check us out below!