LTC

Loan-to-Cost (LTC) Ratio: The Loan-to-Cost (LTC) ratio is a financial metric commonly used in the commercial real estate industry to assess the risk associated with a development or renovation project. It compares the amount of a loan to the total cost of a project.

The LTC ratio is calculated by dividing the loan amount by the total cost of the project. A higher LTC ratio indicates higher risk for the lender because it means the borrower has less personal investment in the project.

For example, if a developer seeks a loan of $8 million for a project that is expected to cost $10 million in total, the LTC ratio would be 80% ($8 million / $10 million).

Lenders typically use the LTC ratio, in conjunction with other financial metrics such as Loan-to-Value (LTV) ratio and Debt Service Coverage Ratio (DSCR), to evaluate the feasibility of a project and the borrower's ability to repay the loan.