November 1, 2026
Written By: David DiNatale, Esq
When a private lender quotes “70% of ARV” or “75% LTV,” it is setting a ceiling on your loan. That ceiling is a percentage of what the property should be worth after the renovation, not what you pay today. The loan-to-value ratio on an ARV loan is the total loan divided by the after-repair value. The lender then takes the lower of that figure and its separate limit on your purchase and rehab costs.
This guide shows the math, a worked example with real dollar figures, and the mistakes that shrink a loan at the closing table.
Loan-to-value (LTV) compares a loan to the value of the property securing it. On a conventional mortgage, that value is the appraised value or purchase price today. On a rehab loan, today’s value is often a poor guide, because the house may be gutted, outdated or unfinished.
After-repair value (ARV) is the estimated market value once the planned work is complete, supported by recent sales of comparable renovated homes nearby. Lenders who finance renovations usually quote leverage against ARV for exactly that reason: the collateral they are protecting is the finished house.
So when an investor searches for LTV on ARV loans, the question is usually this: what share of the finished value will a lender fund, and how does that interact with my purchase price and rehab budget?
The formula is simple:
LTV (on ARV) = Total loan amount ÷ ARV
If you borrow $280,000 on a property with a $400,000 ARV, your LTV on ARV is 70%.
Terminology varies by lender. Some say “LTV” for the as-is ratio and “LTARV” or “LTV on ARV” for the after-repair ratio. Always confirm which value the lender means before you compare quotes.
A fix-and-flip loan is repaid when you sell or refinance the finished house. The lender’s real question is: if this deal goes wrong, can we sell the completed property and recover the loan, interest and costs?
A cap on the loan as a share of ARV leaves a cushion between the loan and the likely sale price. That cushion absorbs a softer market, a longer hold, selling costs, and an ARV that turns out slightly optimistic. Regulators think about collateral cushions the same way. Federal supervisory guidance on high loan-to-value residential lending defines and treats higher-LTV loans as a category needing stronger risk management. Supervisory limits are generally benchmarks rather than absolute bans, and lenders that exceed them need documented justification.
Private lenders are not bank examiners, but they apply the same logic: more cushion where there is more uncertainty, and tighter limits when the project, the borrower or the market is harder to predict.
Most flip loans are sized by two ratios at the same time.
| Ratio | Compares the loan to | Answers the question |
|---|---|---|
| LTV on ARV | Estimated value after repairs | Is there enough equity in the finished house? |
| LTC (loan-to-cost) | Purchase price plus approved rehab budget | How much of your own money is in the deal? |
The loan you receive is the lower figure. In some deals the ARV cap binds. In others, the cost cap does. Knowing which one controls tells you where to push: a better-supported ARV, a lower purchase price, or a more precise scope of work.
For a deeper look at how the two interact, see our piece on LTC vs. LTV for investors.
The percentages below are illustrative, chosen to show the mechanics. They are not Capital Funding’s program terms, which depend on the deal, the borrower and the property.
The deal
Step 1. Total project cost. $250,000 + $60,000 = $310,000.
Step 2. Loan under the cost limit. 90% of $250,000 is $225,000. Add 100% of the $60,000 rehab: $285,000.
Step 3. Loan under the ARV limit. 70% × $400,000 = $280,000.
Step 4. Take the lower. The ARV cap controls, so the maximum loan is $280,000.
Step 5. Check the resulting ratios.
Step 6. Your cash. $310,000 − $280,000 = $30,000 toward the project, before closing costs, interest reserves and carrying costs.
Now see what happens if the ARV is challenged and comes in at $370,000. The ARV cap falls to 70% × $370,000 = $259,000. Your equity requirement jumps from $30,000 to $51,000. A $30,000 swing in ARV moved your required cash by $21,000. This is why the ARV deserves more of your attention than almost any other line in the deal.
Leverage tells you how much you can borrow. It does not tell you whether the deal still pays. Capital Funding’s published ranges are 9.00% to 11.99% for the Fix and Flip Program, with origination fees of 1.50% to 3.00%. Final pricing depends on the specific deal.
On the $280,000 example loan, those published ranges translate to:
| Item | Low end | High end |
|---|---|---|
| Origination fee (1.50% to 3.00%) | $4,200 | $8,400 |
| Annual interest if fully drawn (9.00% to 11.99%) | $25,200 | $33,572 |
| Six months of interest, fully drawn | $12,600 | $16,786 |
Rehab funds are normally released in stages, so you do not pay interest on the whole amount from day one. Treat the figures above as a conservative ceiling for planning, not a quote. For a breakdown of what drives pricing, read Fix and Flip Rates in 2026.
The practical test: subtract the origination fee, interest, closing and selling costs, and your cash in the deal from the ARV. If what remains is thin, a larger loan will not fix it. A better purchase price or a shorter schedule will.
Flip leverage is set against ARV because the property is changing. Other loan types look at different values.
To see how this plays out between a primary home and a rental, our guide to owner-occupied vs. investment loans covers the key differences.
If you want to practice the basic ratio before layering on ARV, a loan-to-value calculation walkthrough shows how the ratio moves as the loan or the value changes.
Because the ARV drives the cap, lenders scrutinize it. Here is how to bring one that holds.
Our guide to calculating after-repair value that lenders accept goes through comps and adjustments in detail. For a longer example of an ARV-driven deal, see the ARV loan playbook and case study.
We cover more of these in financing mistakes investors must avoid.
We fund these loans every day, and the pattern is consistent: the deals that close smoothly are the ones where the investor understood the ARV cap and the cost cap before making an offer.
We are a direct private lender backed by a family office, with more than $1 billion in closed loans and an A+ BBB rating. Being a direct lender means decisions are made by the people who fund the loan, not passed through layers. That matters for ARV loans because the value conversation is a judgment call. We would rather discuss your comps, your scope and your exit early, so the number on the term sheet is the number you can plan around.
Three things we tell investors:
We also finance projects that other lenders will not, including ultra-luxury single-family homes above $10 million. In that segment, comps are thin, and a careful, deal-specific approach to value is what makes a loan possible.
— Daly Kay DiNatale
If you have a flip, a ground-up build or a bridge situation and want to know how it sizes, our Fix and Flip Program is the place to start. For new construction, see the Ground Up Construction Program, and for short-term acquisitions the Hard Money Loan Program. We can close in days, and you can see examples on our funded projects page.
Bring the following and we can give you a clear answer faster:
Our investment loan checklist lists the rest, and the approval criteria guide explains how lenders weigh them. For the investor’s view of the whole process, see how lenders evaluate flip projects.
There is no single number, because it depends on the lender, the property, your experience and the market. Many investors look for the cap to leave a meaningful cushion between the loan and the finished value. Compare quotes on the combined effect of the ARV cap, the cost cap, the rate and the fees, not on one percentage.
For a conventional owner-occupied mortgage, 70% is moderate. For a renovation loan measured against ARV, it is a common type of ceiling because the property’s value is projected rather than proven. Whether it is high or low depends on which value the ratio uses.
It means the loan is 25% larger than the property’s value, which typically happens when negative equity or other debt is rolled into a new loan. The Consumer Financial Protection Bureau describes LTV above 100% as negative equity, which raises lender risk. Real estate flip loans are not structured that way.
No. LTV compares the loan to a value, either current or after repairs. LTC compares it to your total project cost: purchase price plus the approved rehab budget. Most flip loans apply both and fund the lower amount.
