LTC vs. Loan-to-Value (LTV): What’s More Important for Construction Lenders?

Risk in construction lending isn’t static. As a vacant lot is transformed into a finished structure, each stage (from foundation to framing to final inspection) introduces new variables and risks that must be carefully monitored.

I’ve seen deals that looked solid on paper fall apart simply because the risk wasn’t measured or managed throughout the lifecycle. In construction lending, two metrics matter most in tracking risk: Loan-to-Cost (LTC) and Loan-to-Value (LTV). But which one should take priority, and when?

It’s not a matter of choosing one over the other. Instead, successful construction lenders understand that each metric serves a distinct purpose at different project stages. In the sections ahead, I’ll break down both ratios and explore how the right loan management approach can help you use them effectively.

Before digging into when and why to prioritize each ratio, let’s quickly define what they are and how they’re calculated.

• LTC (Loan-to-Cost) = Loan Amount ÷ Total Project Cost
  Focuses on how much of the total development cost is financed versus what the borrower contributes.
  
  
• LTV (Loan-to-Value) = Loan Amount ÷ Property Value
  Measures the loan amount against the current or projected market value of the completed property.

While both ratios provide valuable insight, they serve distinct purposes depending on the stage of the project. As Edward Piazza puts it:

Here’s a quick side-by-side comparison:

These ratios look similar at first glance. But they tell very different stories about project risk. 

Many lenders I work with have found success using Bryt’s Custom User Field (CUF) module to create dedicated fields for both LTC and LTV. It allows them to track these ratios across different project stages and maintain a clear historical record without juggling external spreadsheets.

As you know, LTC becomes essential during the active construction phase, especially during disbursements. Here’s why it matters most at this stage:

• Borrower Commitment: LTC reflects how much of their capital borrowers are putting in. Generally, the standard is 65%-80%. So, a developer investing 25% of total costs (75% LTC) typically shows stronger project commitment than one contributing just 10% (90% LTC). 
  
  
• Ongoing Cost Monitoring: As draws progress, LTC helps you monitor whether costs are staying under budget. Rising LTC percentages often signal cost overruns that need scrutiny.
  
  
• Real-Time Risk View: Unlike LTV, which involves future projections, LTC deals with actual dollars being spent right now. This makes it a better measure during construction.

For construction lenders managing multiple projects, tracking LTC through each draw stage is important. Each disbursement slightly shifts this ratio. So, having systems that automatically calculate these changes saves significant time while reducing human error.

Bryt’s Draws Module comes in handy here. It lets lenders track disbursements. Apart from that, you can customize it to automatically monitor how each draw impacts the LTC ratio, along with notes and audit logs. That means you’ll always have current LTC figures. And it does all this without the manual recalculations that often introduce errors.

As construction nears completion, the spotlight shifts from cost control to asset value—and that’s when LTV (Loan-to-Value) becomes critical. Here’s why:

• Exit Strategy Validation: Upon completion, most construction loans require takeout financing or sale. LTV helps decide whether the completed project’s value will support these exit options.
  
  
• Market Risk Assessment: Unlike LTC, which reflects internal cost dynamics, LTV gauges how the asset stacks up against current market conditions.
  
  
• Regulatory Compliance: Many institutions enforce LTV thresholds for loan classification, making it essential for compliance as the project wraps up.

The transition from LTC to LTV focus isn’t always crystal clear. Smart lenders monitor both throughout the project but weigh their importance differently as construction progresses:

When appraisals come in below projections or market conditions change, being able to quickly recalculate LTV across your portfolio becomes crucial. Without proper systems, this can become a spreadsheet nightmare.

Bryt’s Custom Reports lets you generate specialized, ratio-driven reports that display both LTC and LTV metrics at a glance. You can compare projected vs. actual values across the project lifecycle, helping you flag risk early. At the portfolio level, these reports provide a comprehensive view of exposure, making it easier to stay ahead of loan classification requirements and investor expectations.

To visualize how the importance of LTC and LTV shifts throughout a project’s lifecycle, here’s a quick breakdown across key construction phases:

Let’s look at two scenarios that highlight how LTC and LTV can shape risk profiles differently.

Project A: Office Building Conversion (Stable Structure, Low Risk)

• Project Type: Mid-size office building being converted into medical suites in a primary metro area.
  
  
• Loan Amount: $7M
  
  
• Total Project Cost: $10M → 70% LTC
  
  
• Projected Completed Value: $11.6M → 60% LTV
  

What Worked:

• The borrower contributed 30% equity up front, signaling strong commitment and financial capacity.
  
  
• The project cost was well-controlled with minimal variance through the draw cycle.
  
  
• Conservative valuation assumptions ensured refinancing wouldn’t hinge on aggressive market growth.

Outcome: 

The project was completed on budget and on time. The lender monitored LTC throughout the draw process, with automated alerts set to flag any draw requests that would shift the LTC above internal policy thresholds. 

With a final appraisal close to projections, the borrower was able to secure takeout financing at favorable terms. The loan exited cleanly with minimal administrative friction.

Project B: Mixed-Use Development

• Project Type: Ground-up mixed-use development with retail and residential units.
  
  
• Loan Amount: $8.5M
  
  
• Total Project Cost: $10M → 85% LTC
  
  
• Projected Completed Value: $10.6M → 80% LTV
  

What Happened:

• The borrower only contributed 15% equity—a red flag masked by a favorable appraisal.
• The initial budget didn’t adequately account for supply chain volatility or entitlement delays.
• The market softened midway through construction, reducing end value projections by nearly 10%.

Complications:

As material costs rose and change orders piled up, the actual project cost increased to $11.2M—pushing LTC to 92%. Meanwhile, updated appraisals during the final phase adjusted the property value downward to $9.8M—ballooning the LTV to nearly 87%, well above the lender’s 75% threshold for refinancing readiness.

Lender Response:

Draw requests were paused pending revised budget approvals. The lender used Bryt’s Loan Modification module to restructure terms—adding interest reserves and reducing the disbursement pace to control exposure. All changes were logged automatically, maintaining full audit trails and preserving compliance.

What separates Project A from Project B isn’t just better planning or a more conservative borrower—it’s the lender’s ability to monitor and respond to ratio movement in real time.

• In Project A, LTC stayed within bounds, and the LTV left room for unexpected fluctuations.
  
  
• In Project B, both ratios tightened simultaneously—exposing the lender to higher risk.

Lesson:

It’s not about which metric is “better.” It’s about tracking both and recognizing when one starts flashing red. Your ability to adjust loan terms proactively—not reactively—can mean the difference between a clean exit and a loss-mitigation scramble.

For lenders with multiple construction projects, tracking both LTC and LTV in real time presents some challenges:

• Documentation Inconsistency: Projects often use different formats for draw requests. This makes ratio calculations difficult to standardize.
  
  
• Spreadsheet Limitations: Most lenders still rely on complex spreadsheets that require manual updates. These sheets are prone to formula and human errors.
  
  
• Communication Gaps: Sharing current LTC/LTV status with stakeholders often involves cobbling together reports from multiple systems.

A good document template system can transform how you communicate with both internal stakeholders and borrowers. Bryt’s Custom Document Template Module gives lenders the ability to generate standardized reports with current LTC/LTV data. This makes it easy to share accurate, up-to-date information with internal teams or borrowers.

Borrowers appreciate understanding how their draw requests impact the overall loan health. Seeing current LTC percentages and available funds in a secure portal reduces their questions and speeds up draws.

This transparency helps borrowers better plan their cash flow needs. It also reduces surprises during the construction process and creates a documented history of communications. This communication documentation can be invaluable if questions arise later.

Bryt’s Borrower Portal provides a secure, real-time dashboard where borrowers can:

• View current LTC/LTV calculations and draw status.
  
  
• Access key documents related to project costs and valuations.
  
  
• Streamline communication around draw approvals and project milestones.

By eliminating the need for manual report generation and inconsistent updates, the portal ensures consistency across all projects.

Individual project monitoring is definitely important. But, portfolio-wide visibility is where construction lenders can excel at risk management. Being able to see LTC and LTV metrics across all construction loans helps spot trends. These trends can help identify issues before they become problems.

Here’s how Patrick McDermott puts it:

Bryt’s Custom Reports feature can help you generate customized dashboards that can help you:

• Track LTC/LTV metrics across projects.
  
  
• Identify projects approaching threshold limits.
  
  
• Prepare comprehensive documentation for regulatory exams.

This bird’s-eye view helps you answer questions like “What percentage of our construction portfolio has an LTC above 80%?” or “How many projects have LTVs that exceed our internal guidelines?” Without automated reporting, answering these questions can take days of manual work.

LTC and LTV aren’t competing metrics—they’re complementary tools that serve different purposes at different stages of a construction project.

LTC provides crucial insight during active construction. LTV, on the other hand, becomes important as projects near completion. Both metrics should inform lending decisions throughout the project lifecycle. This happens with their relative importance shifting as construction progresses.

With the right loan management system in place, tracking LTC and LTV becomes less about compliance and more about strategic control. With the right loan management system in place, tracking LTC and LTV becomes less about compliance and more about strategic control.

Ready to gain that kind of visibility and control across your portfolio? Let us show you how Bryt can help.

Bob Schulte

About Bob Schulte

Bob Schulte, CEO, Bryt Software is the visionary leader behind Bryt’s groundbreaking approach to loan management. With 30+ years of experience in the SaaS industry and an impressive 25 experience years of education, Bob brings diverse SaaS expertise to the table. He is known for his innovative approaches and commitment...