What Loan to Cost Is
You’ll meet loan to cost, or LTC, as the ratio of your development loan to the total cost of the project: land plus build plus professional and other costs. It’s the main metric a lender uses to size its exposure during construction.
Your LTC works alongside loan-to-GDV, not instead of it: LTC caps the loan against what you spend, while loan-to-GDV caps it against the finished value, and both bite at once.
You can’t read LTC in isolation from the end value. Together they decide how much of the build your cash flow has to carry, and the day your broker lays both ratios over your appraisal, you see where the funding line actually lands.
How LTC Is Calculated
You divide the total loan by total project cost and multiply by 100, so a £2,000,000 scheme funded with a £1,400,000 loan sits at 70% LTC. Total cost pulls in land, the build contract, professional and planning fees, finance costs and a contingency of usually 5 to 10%.
Your profit never enters the sum, and that catches people out. Profit is your return, not a cost, so it can’t inflate the cost base or the loan.
You can’t count your margin as a cost to borrow more. At month-end your quantity surveyor agrees the cost schedule that sets your LTC, and with it how much your cash flow must find.
Why LTC Matters to Lenders
You fund whatever the LTC doesn’t. At 75% LTC you contribute 25% of all project costs as equity, and that equity is the lender’s first-loss buffer: if costs overrun or the scheme stumbles, your money absorbs the hit before theirs.
At 70 to 75% for most senior lenders, the LTC ceiling is the practical limit; stretch senior can reach 80 to 85%, and beyond 85% you need mezzanine or fresh equity.
You won’t push past 85% on senior debt alone. Higher LTC means more lender exposure and a higher price, so at month-end your accountant weighs the extra rate on 80% leverage against holding more cash flow back at 70%.
LTC vs LTGDV: Both Caps Apply
You’re constrained by two limits at once, and the loan is the lower of them. The LTC cap holds the loan against total costs; the loan-to-GDV cap holds it against projected completed value. Whichever calculates smaller is the one that binds.
Your margin decides which cap catches you: a strong scheme, with low costs relative to GDV, is usually limited by LTC, while a thin-margin scheme hits the loan-to-GDV cap first.
You can’t out-borrow the tighter of the two caps. On £2m of costs and a £3.5m GDV, the 75% LTC cap of £1.5m binds below the 65% loan-to-GDV cap of £2.275m, so £1.5m is all your cash flow gets.
LTC and the Drawdown Process
You don’t get the whole loan on day one. The lender maintains the LTC ratio dynamically, advancing in tranches as certified costs are incurred, so the loan balance grows with the build and the ratio is checked at every drawdown request.
Your discipline on budget is what keeps it clean: if actual costs run past budget, the LTC can be breached, which triggers a demand for extra equity or fresh lender consent.
You can’t quietly overspend without the LTC catching it. At a drawdown, your monitoring surveyor flags that costs have outrun the schedule, and the lender asks your cash flow to top up before the next tranche releases.
Loan to Cost FAQs
What is loan to cost (LTC) in development finance?
Loan to cost is the ratio of the total development loan to the total cost of the project, expressed as a percentage. Total cost includes land, the build contract, professional and planning fees, finance costs and a contingency. It’s the primary metric development lenders use to size their exposure during the construction phase, working alongside loan-to-GDV, which caps the loan against the projected completed value.
How is LTC calculated?
LTC is the total loan amount divided by total project cost, multiplied by 100. For example, a project with total costs of £2,000,000 funded by a £1,400,000 loan is at 70% LTC. Total project cost typically includes land acquisition, construction costs, professional fees, planning costs, finance costs and a contingency of usually 5 to 10% of the build cost. Developer profit is never included, because it is a return rather than a cost.
What LTC can I get, and how much equity do I need?
Most senior development finance lenders cap at around 70 to 75% LTC, which means you fund the remaining 25 to 30% of total project costs as equity. Stretch senior debt can reach 80 to 85% LTC, and above 85% you generally need mezzanine finance or additional equity. Your equity acts as the lender’s first-loss buffer, absorbing cost overruns or problems before the lender’s position is affected, which is why higher LTC attracts a higher rate.
What is the difference between LTC and LTGDV?
LTC limits the loan against total project cost; loan-to-GDV (LTGDV) limits it against the projected gross development value of the finished scheme. Both apply at the same time, and the actual loan is the lower of the two calculations. A strong-margin scheme (low costs relative to GDV) is usually limited by the LTC cap, while a thin-margin scheme tends to hit the LTGDV cap first. On £2m costs and a £3.5m GDV, a 75% LTC cap of £1.5m binds below a 65% LTGDV cap of £2.275m.
How we reviewed loan to cost
What we covered. We explain loan to cost in 2026: how the ratio is calculated, what counts as project cost, the equity it implies, how it works alongside loan-to-GDV, and how it’s maintained through drawdowns. We don’t rely on comparison-site summaries or aggregator data.
Data sources. LTC ranges were checked against primary sources in July 2026, including specialist lender product pages and the lenders we assess in our development finance reviews and roundup.
How we handle gaps. Where a figure varies by lender, we give the market range rather than a single false-precision number, and we flag that what counts as cost, and your maximum advance, depend on the lender.
Update cadence. We re-verify this page at least monthly, and whenever market pricing moves. The verification date reflects the most recent full review. Some links on this page are affiliate links, see our editorial policy.
Regulatory note. This page is editorial content, not regulated financial advice. Development finance to a limited company or investor is generally unregulated lending, so compare facilities and read the terms before you sign.