Every fix and flip loan is quoted with two leverage numbers, and most investors only pay attention to one of them. They focus on the loan to ARV cap and skip right past loan to cost, then get surprised at closing when the cash they need is higher than they planned. Loan to cost, or LTC, is the number that actually determines how much of your own money goes into a deal, and understanding it is the difference between knowing your cash to close before you make an offer and finding out the hard way. This guide explains exactly what LTC is, how 100 percent LTC works, and why it almost never means zero dollars out of pocket, with the math run on a real deal.
We are a Pittsburgh-based brokerage, and the single most common point of confusion we clear up for new flippers is this one. Once you understand LTC and how it interacts with the ARV ceiling, the rest of fix and flip financing stops feeling like a black box.
What loan to cost actually measures
Loan to cost is the percentage of your total project cost that the lender funds. Total project cost is simple: the purchase price plus the rehab budget. If you buy a property for 100,000 dollars and budget 50,000 dollars of work, your total project cost is 150,000 dollars. If the lender funds 90 percent of that, your LTC is 90 percent, the loan is 135,000 dollars, and you bring the remaining 15,000 dollars plus closing costs.
The reason LTC matters more than the headline ARV number is that it is usually the figure that decides your cash to close. A lender can advertise a high loan to ARV cap all day, but if their LTC is only 85 percent, you are bringing real money to the table regardless of how much room the finished value leaves. LTC is the leverage you feel in your bank account.
How LTC is usually split: purchase versus rehab
Here is the detail that trips people up. Most lenders do not quote a single blended LTC. They quote two separate numbers: a percentage of the purchase price and a percentage of the rehab budget. A common 2026 structure is 90 percent of the purchase price plus 100 percent of the rehab budget. Those blend into an overall LTC, but the split is what matters for your cash.
That 100 percent of rehab is where the phrase 100 percent financing comes from, and it is also where the confusion starts. It does not mean 100 percent of the whole project. It means the lender funds your entire renovation budget, while you cover a slice of the purchase. The full leverage logic, including how that gets marketed as 100 percent financing, is in our guide to how 100 percent fix and flip financing works. The takeaway: your down payment is almost always tied to the purchase, not the rehab.
The ARV ceiling that caps everything
LTC does not operate alone. Every fix and flip loan also has a loan to ARV cap, usually around 70 percent of the after repair value, and you are limited by whichever ceiling you hit first. The LTC tells the lender how much they are willing to fund based on your costs. The ARV cap tells them the maximum they will lend based on the finished value, so they stay protected if the project goes sideways. We explain how lenders calculate that finished number in our guide to after repair value.
On a strong deal with a healthy spread between cost and value, the LTC is the binding constraint and the ARV cap is comfortably above your loan. On a thin deal where you paid too much or the rehab is heavy relative to the finished value, the ARV cap kicks in first and quietly reduces your loan below what the LTC alone would allow. That is the lender telling you the deal is tight.
A real deal: where 100 percent LTC really lands
Let me run an actual structure so the two ceilings are concrete. You buy a property for 120,000 dollars and budget 60,000 dollars of rehab. Your total project cost is 180,000 dollars. You pull comps and the ARV supports 270,000 dollars.
The lender offers 90 percent of purchase plus 100 percent of rehab. That is 108,000 dollars toward the purchase and the full 60,000 dollars of rehab, a total loan of 168,000 dollars. As a percentage of your 180,000 dollar total project cost, that is about 93 percent LTC. Now check the ARV ceiling: 70 percent of 270,000 dollars is 189,000 dollars. Your 168,000 dollar loan sits below that, so the loan is not capped and you get the full structure. Your cash into the deal is the 12,000 dollar slice of purchase the lender did not fund, plus closing costs and an interest reserve.
Notice what just happened. Even with 100 percent of the rehab funded, you still brought 12,000 dollars plus costs. That is the honest version of 100 percent financing: the rehab is fully covered, but the purchase down payment and closing costs are yours. Anyone promising literally nothing out of pocket is either rolling the gap into a higher rate, requiring a deeply discounted purchase, or not telling you the whole structure.
When 100 percent LTC really means zero down
There is one situation where a flip genuinely approaches no money down, and it is worth understanding because it is real. If you buy a property far enough below market that even the purchase price fits comfortably under the ARV cap, a lender can sometimes fund the entire purchase plus the full rehab, because the total loan still sits under 70 percent of ARV. In other words, the deeper your discount on the buy, the closer 100 percent LTC gets to actually meaning 100 percent of the money.
This is why experienced flippers obsess over the purchase price. The cheaper you buy relative to ARV, the more of the deal the leverage covers and the less of your own cash you risk. It is also why your buy is the most important decision in the whole project, a point we make in our guide to estimating a rehab budget before you buy.
How your experience changes your LTC
LTC is not the same for every borrower. Lenders price experience, and your track record moves the purchase percentage directly. A borrower with several completed flips often gets the full 90 percent of purchase and the best rate. A first-timer might see 80 to 85 percent of purchase until they have a couple of projects on record, which means more cash to closing on the same deal. That is not a penalty, it is the lender pricing the risk of a first rehab. We break down those tiers in our fix and flip loan requirements guide, and it is the single biggest reason two investors can bring the identical deal and walk away with different cash to close.
How LTC connects to your draws
One last piece. The rehab portion of your LTC is not handed to you at closing. The lender funds 100 percent of the rehab budget, but releases it in stages as you complete the work, through a draw schedule. You front each phase of the renovation and get reimbursed after an inspection confirms the work is done. That means even with 100 percent of rehab financed, you need working capital to float each phase before the draw arrives. We explain exactly how that release process works in our guide to fix and flip draw schedules, and it is a part of LTC that surprises first-time borrowers more than anything else.
The bottom line on loan to cost
Loan to cost is the leverage number that decides your cash to close, and it usually comes as two figures: a percentage of purchase and a percentage of rehab. 100 percent financing almost always means 100 percent of the rehab, not the whole deal, so plan to bring a slice of the purchase plus closing costs unless you bought deeply enough below ARV to fit the entire purchase under the 70 percent ceiling. Know your LTC and your ARV cap before you make an offer, and you will never be surprised at the closing table.
Want us to run both ceilings on a specific deal and tell you exactly what your cash to close will be? Send the purchase price, rehab budget, and your ARV comps through our contact page or call 412-990-2941. You can see the full range of short-term options on our fix and flip and bridge loan page, and if you plan to hold the finished property as a rental, model the numbers on our DSCR deal calculator.
FMC Capital is a licensed mortgage brokerage, NMLS #1840537. This article is for educational purposes only and is not a commitment to lend, an offer of credit, or financial advice. Fix and flip and bridge loan terms, leverage, rates, and qualification standards vary by lender, project, borrower experience, and market at the time of application.