First Choice Private Capital
Direct Private Capital for Investors, Builders, & Developers
Defining Terms
Understand the terminology behind private lending.
Private lending uses a lot of abbreviations and technical language. Below are some of the most common terms lenders, brokers, investors, and underwriters use when reviewing a deal.
Loan To Cost
Loan To Cost shows how much of the total project cost the lender may finance.
Loan To Cost compares the loan amount to the borrower’s total project cost. For a fix and flip project, that usually means the purchase price plus the rehab budget.
Simple Formula
Loan Amount ÷ Total Project Cost
Example
$360,000 loan ÷ $450,000 total project cost = 80% Loan To Cost
Why It Matters
Higher Loan To Cost usually means the borrower is putting less cash into the project.
