90% LTC Fix and Flip Loans: How High-Leverage Rehab Financing Really Works

LTC stands for loan-to-cost. A 90% LTC fix-and-flip loan finances up to 90% of your total project cost, which is purchase price plus renovation budget. You bring the remaining 10% as your down payment, plus closing costs and any reserves the lender requires.

Here is what that looks like on a real deal. Purchase price: $185,000. Rehab budget: $55,000. Total project cost: $240,000. At 90% LTC, the lender finances up to $216,000. Your cash contribution is $24,000 for the down payment, plus roughly $4,300 to $6,500 in origination fees (2 to 3 points), plus insurance and reserves. Total out-of-pocket: roughly $32,000 to $38,000.

At 80% LTC on the same deal, the lender finances $192,000 and you bring $48,000 plus fees. The difference between 90% and 80% LTC is about $24,000 in cash you either keep in the bank or deploy on another project.

Let us walk through a complete deal to show how the numbers connect.

The property: A 3-bedroom, 1.5-bath single-family home in a suburban market. Purchase price: $185,000. The house needs a full kitchen renovation, two updated bathrooms, new flooring throughout, paint, and landscaping. Contractor bid: $55,000.

The comps: Three renovated homes within a half mile sold in the past 60 days at $295,000, $305,000, and $310,000. Median ARV estimate: $305,000.

The loan: 90% LTC = $216,000 loan. The lender also caps at 70% of ARV. 70% of $305,000 = $213,500. The ARV cap controls here, so actual loan proceeds are $213,500, not $216,000. Cash to close: $26,500 down payment + $4,270 in origination (2 points) + $2,500 in closing costs and insurance = roughly $33,270.

The hold: 5-month renovation at 11% annual interest on $213,500. Monthly interest: roughly $1,957. Total interest over 5 months: $9,785. Property taxes and insurance during hold: roughly $2,500. Utilities: $750. Total holding costs: $13,035.

The exit: List at $309,000, sell at $305,000. Agent commissions (5.5%): $16,775. Seller closing costs: $3,000. Loan payoff: $213,500.

Net profit: $305,000 sale - $213,500 payoff - $16,775 commissions - $3,000 closing - $13,035 holding costs - $33,270 cash invested - $55,000 rehab (already in loan but the $26,500 gap was your cash) = roughly $23,420 profit on $33,270 invested. That is a 70% cash-on-cash return over 5 months.

This deal works because the spread between total cost ($240,000) and ARV ($305,000) is $65,000, which is enough to absorb all the transaction and holding costs.

The scenario above shows how the ARV cap quietly became the binding constraint ($213,500 vs the $216,000 LTC calculation). This happens more often than borrowers expect, especially when purchase prices are higher relative to ARV.

Consider a different deal: $210,000 purchase, $40,000 rehab, $250,000 total cost. ARV of $310,000. At 90% LTC, cost-based proceeds are $225,000. At 70% ARV, value-based proceeds are $217,000. The ARV cap cuts $8,000 from your expected loan. Your out-of-pocket jumps from $25,000 to $33,000.

Now consider an even tighter scenario: $220,000 purchase, $45,000 rehab, ARV of $300,000. LTC calculation: $238,500. ARV calculation: $210,000. The ARV cap slashes $28,500 from your proceeds. Suddenly you need $55,000+ in cash, and the deal looks nothing like the 90% LTC you were expecting.

The takeaway: always run both the LTC and ARV calculations before making an offer. If the deal only looks attractive at the LTC number and falls apart at the ARV cap, the purchase price is too high.

High leverage is not automatic. Lenders evaluate several factors before granting 90% LTC:

Credit score: Most lenders require 660+ for high-leverage fix-and-flip loans. Scores above 700 typically get better rates and fewer conditions.

Experience: Borrowers with 2 or more completed flips usually qualify more easily. First-time investors can get 90% LTC on a case-by-case basis when the deal is strong and reserves are solid.

Cash reserves: Expect to show 3 to 6 months of interest payments in liquid reserves beyond your down payment and closing costs. On a $216,000 loan at 11%, that is roughly $6,000 to $12,000 in the bank after closing.

Rehab scope: A detailed, itemized scope of work with contractor bids makes the file stronger. Vague budgets like "$50K for general renovations" raise red flags. Line-item budgets broken down by trade (demo, electrical, plumbing, kitchen, bath, flooring, paint, exterior) show the lender you have a plan.

Comp support: The ARV needs to be supported by recent closed sales, not active listings or the borrower's opinion. Weak or stale comps usually result in reduced leverage or a declined file.

For a single deal, the difference between 80% and 90% LTC might be $20,000 to $30,000 in cash. That matters, but it is not transformative. Where high leverage truly changes the math is when you are running multiple projects.

An investor doing three simultaneous flips at 80% LTC on $240,000 average project cost needs roughly $144,000 in down payments alone, plus fees and reserves. At 90% LTC, the same three projects need roughly $72,000 in down payments. That $72,000 difference either stays in the bank as a safety net or funds a fourth project.

High-leverage lending is most valuable as a scaling tool for investors who have proven they can execute. It is least valuable as a way to squeeze into a deal you cannot otherwise afford. If the only reason you need 90% LTC is because you do not have enough cash for the project, the risk profile is different than if you are using it to keep capital available across a portfolio.

On a 90% LTC loan, the rehab portion is almost never handed over as a lump sum at closing. It sits in an escrow holdback and gets released in draws as work is completed and verified, which protects both the lender and the borrower from a contractor walking away mid-project with funds in hand.

Using the $213,500 loan from the deal walkthrough above, say $40,000 of that is the rehab holdback (the rest covers the purchase). A typical draw schedule might break that into 3 to 4 draws: an initial draw of $10,000 after demo and rough mechanicals are inspected, a second draw of $12,000 after drywall, electrical, and plumbing rough-in pass inspection, a third draw of $12,000 after kitchen and bathroom installation, and a final draw of $6,000 after flooring, paint, and punch-list items are complete.

Most lenders require a third-party inspection before releasing each draw, which usually costs $100 to $175 and takes 1 to 3 business days to schedule. Funds are typically wired within 24 to 48 hours after the inspection clears. Borrowers should plan their contractor payment schedule around this timeline; paying a contractor faster than the lender reimburses you means fronting the gap from your own reserves.

A practical tip: negotiate your contractor's payment milestones to mirror the lender's draw schedule as closely as possible. If your lender releases funds after drywall, structure your contract so the contractor's second payment is also tied to drywall completion, not an arbitrary date. This keeps your cash flow aligned and avoids the need to carry extra float during the renovation.