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The loan-to-cost (LTC) ratio is a metric used in commercial real estate construction to compare the financing of a project (as offered by a loan) with the cost of building the project. The LTC ratio allows commercial real estate lenders to determine the risk of offering a construction loan. It also allows developers to understand the amount of equity they retain during a construction project. Similar to the LTC ratio, the loan-to-value (LTV) ratio also compares the construction loan amount but with the fair-market value of the project after completion.
Source: Investopedia
