Loan to cost please define this construction financing term?
a loan percentage or amount a lender is willing to finance based on the construction costs. Example: construction costs = 200,000 ltc = 90% loan given by lender = 180,000. there's also ltv vs ltc this means that the lender is willing to lend based on future value of home however they will only lend a certain amount of the construction costs. example: Future value = 250,000 ltv = 90% loan based on appraisal value = 225,000 (250K * 90%) costs to build = 200,000 ltc = 90% total amount being lent = 225,000. However in this case, the lender will not finance all the construction costs as they would want the borrower to have "skin in the game" meaning some equity in the project so that they don't simply walk away if the deal were to go bust. So a lender may require that they have at least 10% of the construction costs into the deal.
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