For sophisticated borrowers, numbers are never just numbers. In the world of large-scale property and investment finance, how those numbers are interpreted can determine the success—or failure—of a transaction.

Two of the most influential figures in any deal are Loan-to-Cost (LTC) and Loan-to-Value (LTV). On paper, they may look similar: both measure leverage and both are central to how lenders underwrite risk. But in practice, they tell two very different stories about a borrower’s position, a project’s viability, and a lender’s confidence.

In 2025, understanding how LTC and LTV interact—and which one truly matters to your transaction—has become essential for developers, investors, and family offices seeking capital at scale.

LTV: The Traditional Benchmark of Security

Loan-to-Value (LTV) is the most widely recognised measure of leverage. It expresses the loan amount as a percentage of the value of the property—usually the market or appraised value at a specific point in time.

For example, a £60 million loan secured against a property valued at £100 million would represent a 60% LTV.

To lenders, LTV indicates the margin of safety in a transaction: how much of the asset’s value is financed versus retained as equity. The lower the LTV, the greater the cushion against market fluctuations or forced-sale scenarios.

In mature, income-producing assets—such as prime commercial property or stabilised residential portfolios—LTV remains the dominant metric. It reflects real-time value and gives lenders a clear sense of collateral protection.

But when it comes to development finance or value-add projects, LTV can be misleading. That’s where LTC comes into play.

LTC: The Developer’s Metric

Loan-to-Cost (LTC) measures leverage against the total cost of delivering a project—not its current or completed market value. It considers all inputs: land acquisition, construction, professional fees, and contingencies.

For instance, if a project costs £80 million to complete and a lender provides £60 million of finance, the LTC would be 75%.

This metric tells lenders how much of the total investment is being financed versus funded by the borrower’s own capital. It is particularly relevant in development, refurbishment, and repositioning projects, where value is being created over time rather than simply transferred.

While LTV captures the snapshot of today, LTC captures the strategy of tomorrow.

How Lenders Use LTV and LTC Together

In large, complex finance deals, lenders rarely rely on a single metric. Instead, they analyse both LTC and LTV to understand two critical dimensions: the borrower’s commitment and the project’s risk profile.

LTC shows how much financial exposure the borrower has relative to total project cost—a proxy for alignment of interest. LTV, meanwhile, demonstrates how well the lender is protected if the market turns or completion is delayed.

A typical high-value development might be funded at:

• 65–70% Loan-to-Cost
• 55–60% Loan-to-Value on Gross Development Value (GDV)

That balance ensures sufficient borrower equity while maintaining security coverage for the lender.

For family offices and UHNW developers, these ratios often serve as a language of trust. They frame the conversation about leverage, contingency, and capital efficiency in clear, measurable terms.

Why Lenders Have Become More Sensitive to These Metrics in 2025

The past three years have reshaped lender behaviour. Rising construction costs, inflationary pressures, and rate volatility have eroded developer margins. In response, lenders have tightened their focus on cost discipline and valuation robustness.

Private credit funds and specialist banks now demand detailed visibility over total cost and projected value—scrutinising assumptions that underpin both LTC and LTV.

In 2025, lenders want answers to questions like:

• Has the developer’s cost plan been stress-tested against inflation risk?
• Are exit valuations based on realistic yields or speculative growth?
• Does the borrower’s equity contribution genuinely absorb cost overruns?

This shift has made Loan-to-Cost the anchor of early negotiations and Loan-to-Value the final arbiter of deal approval.

Negotiating Leverage: What Matters Most to Borrowers

From a borrower’s perspective, the choice between LTC and LTV is not just technical—it’s strategic.

A high LTV may look favourable, suggesting strong security, but if LTC is excessive, it implies thin equity and reduced credibility with lenders. Conversely, a low LTC signals strength but can tie up too much capital that might be better deployed elsewhere.

The most successful borrowers in 2025 balance the two. They present funding requests that reflect disciplined cost control and conservative valuation—backed by transparency and data.

For UHNW clients managing multiple developments or portfolios, this balancing act becomes an art form. Willow Private Finance’s private client team often structures facilities that blend metrics intelligently—securing optimal leverage while maintaining lender confidence.

The Private Credit Advantage

Private credit lenders have played a transformative role in redefining how LTC and LTV are applied at the upper end of the market.

Unlike banks, which often cap LTV at rigid thresholds, private funds evaluate each transaction holistically. They may accept higher LTC ratios—sometimes up to 80%—if the sponsor’s track record, exit strategy, and collateral strength justify the risk.

They can also offer structured solutions:

• Combining senior and mezzanine tranches within a single facility.
• Allowing profit participation or partial capitalisation of interest.
• Tying leverage to milestone performance rather than static metrics.

This flexibility gives private borrowers more control over liquidity, capital allocation, and project timing — without sacrificing prudent risk management.

Why Transparency Builds Trust

Whether negotiating with a private fund or a boutique bank, transparency is the currency of modern lending.

Lenders are not afraid of complexity, but they are wary of opacity. Detailed reporting on costs, progress, and end values builds the credibility that underpins higher leverage and better pricing.

Borrowers who engage advisors early—particularly those experienced in multi-lender or private credit structures—gain a decisive edge. By aligning financial presentation with lender expectations, they often secure faster approvals and more favourable terms.

At Willow Private Finance, our role is to translate that complexity into clarity. We prepare detailed cost-to-value analyses, stress-tested appraisals, and structured proposals that speak the language of both borrower and lender.

The Metrics That Define Tomorrow’s Deals

As markets continue to normalise post-volatility, the interplay between LTC and LTV will remain central to how capital is deployed in 2025 and beyond.

LTC will continue to dominate development and value-add lending, where cost control and equity discipline matter most. LTV will remain key in income-based and refinancing transactions, where security coverage and yield stability drive credit appetite.

But it’s the relationship between them—how cost becomes value, and how equity aligns with risk—that defines sophisticated finance today.

For UHNW and family office borrowers, mastering these metrics isn’t optional. It’s fundamental to securing intelligent, long-term capital that grows rather than constrains wealth.

How Willow Private Finance Can Help

At Willow Private Finance, we specialise in structuring complex, high-value lending for developers, investors, and family offices.

We work with a network of private banks, credit funds, and specialist lenders that understand the nuances of leverage, capital structure, and valuation methodology. Our role is to align your funding strategy with your asset strategy — ensuring that both your numbers and your narrative stand up to institutional scrutiny.

Whether you’re seeking ground-up development finance, refinancing, or portfolio leverage, we’ll help you navigate the fine balance between Loan-to-Cost and Loan-to-Value — intelligently, discreetly, and efficiently.

Frequently Asked Questions

What is the main difference between Loan-to-Cost and Loan-to-Value?
Loan-to-Cost measures borrowing against total project cost; Loan-to-Value measures borrowing against current or appraised asset value. LTC reflects investment efficiency, while LTV shows security coverage.

Which metric do lenders care about more?
It depends on the asset and stage. For development projects, LTC is key. For stabilised or income-producing assets, LTV takes precedence. In large finance deals, both are used together.

Can I negotiate higher leverage if my track record is strong?
Yes. Private credit lenders, in particular, consider sponsor experience and project quality. A proven track record can justify higher LTC or LTV ratios.

What happens if construction costs increase mid-project?
Lenders will reassess LTC and may request additional equity or rebalancing. Clear contingency planning and transparent reporting protect both borrower and lender.

How can Willow Private Finance assist?
We structure and negotiate complex finance transactions, ensuring the deal reflects both accurate cost metrics and sustainable valuations. Our relationships with private lenders allow us to deliver tailored leverage that fits your project.

📞 Need Help Structuring Finance for a Major Project?

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