Fix and flip lenders use two different values to determine how much they will lend: the current purchase price (or as-is value) and the after-repair value (ARV). Understanding both is essential for sizing your loan correctly.

Loan-to-Cost (LTC)

Loan-to-Cost is calculated as the total loan amount divided by the total project cost (purchase price plus renovation budget). Most fix and flip lenders will lend up to 85%–90% of total project cost, meaning you need to bring 10%–15% of total cost to closing.

Loan-to-ARV

Loan-to-ARV is calculated as the total loan amount divided by the after-repair value. Lenders cap the loan at typically 65%–75% of ARV — this is the backstop that protects the lender if the project goes wrong or the market softens.

Which Limit Applies?

Both limits apply — the lender uses whichever results in the lower loan amount. In practice, the ARV cap is often the binding constraint on larger or more ambitious renovation projects.

Example

Purchase price: $350,000. Renovation budget: $100,000. Total project cost: $450,000. ARV: $600,000.

• 85% of project cost = $382,500
• 70% of ARV = $420,000
• Lender uses the lower = $382,500 max loan
• Down payment needed: $450,000 − $382,500 = $67,500