What is it? (plain English)
These are three ways lenders measure how much of a deal they'll finance. LTV (loan-to-value) compares the loan to the property's current value. LTC (loan-to-cost) compares the loan to the total project cost (purchase + renovation). ARV (after-repair value) is the property's projected value after improvements — and it usually sets the ceiling on a renovation or construction loan.
Who is it for?
Anyone borrowing against property — but especially investors doing fix-and-flip, renovation, or construction, where all three apply to the same deal.
When might it make sense?
Every time you size a loan. On a straight purchase, LTV does most of the work. On a project with rehab, LTC governs how much of your costs are financed, while ARV caps the total against the finished value.
Good to know
These ratios work together, not alone. A lender might finance up to a percentage of cost (LTC) and cap the loan at a percentage of the after-repair value (ARV) — whichever is lower controls. Your required cash-in is essentially the gap these ratios leave.
Potential advantages
You can estimate your cash-to-close before you apply, compare deals apples-to-apples, and spot when a loan offer is actually conservative or aggressive.
Potential limitations
ARV is a projection — an optimistic one is the most common way deals go wrong. Values come from appraisals or broker opinions, not your own estimate, and the ratios vary by lender and deal.
Documents you may need
The purchase price, a realistic rehab budget, and supportable comparable sales for the after-repair value.
Questions to ask before you choose
- Which ratio is the binding constraint on my deal?
- Is my ARV genuinely supported by comps?
- How much cash will the gap require?
- How conservative is this lender's ARV view?
How Kyon helps
We help you run these numbers honestly on your specific deal — especially gut-checking the ARV — so you know your real leverage and cash-in before you commit.