Loan Calculations
How loan amounts are calculated for new construction projects.
Loan Calculation Methods
Formulas and methods used to determine maximum loan amounts
Calculation Type
Max Loan Per LTV
Description
Based on property value after completion
Formula
Property Value × Max LTV%
Calculation Type
Max Loan Per LTC
Description
Based on total project costs
Formula
Total Costs × Max LTC%
Calculation Type
Max Loan Per Initial Disbursement
Description
Initial funding limitations
Formula
Based on approved costs
Calculation Type
Cost Basis
Description
How costs are calculated for loan purposes
Formula
Net Purchase Price + Construction Costs
Calculation Type
Net Purchase Price
Description
Purchase price minus credits
Formula
Purchase Price - Credits
Calculation Type
Total Costs
Description
All costs associated with the project
Formula
Purchase + Construction + Other Costs
Calculation Type
Construction Costs
Description
Costs for construction portion
Formula
Hard Costs + Soft Costs + Contingency
LTV vs LTC Calculation Example
Practical example of how maximum loan amount is determined
Project Details
- • Land purchase: $200,000
- • Construction costs: $300,000
- • Total project cost: $500,000
- • After-completion value: $600,000
LTV Calculation (75%)
$600,000 × 75% = $450,000
LTC Calculation (85%)
$500,000 × 85% = $425,000
Maximum Loan Amount
$425,000 (the lower of LTV or LTC)
Initial Disbursement Calculation
How the initial loan disbursement is determined
Project Details
- • Land purchase: $200,000
- • Closing costs: $15,000
- • Initial construction costs: $50,000
- • Total initial needs: $265,000
Borrower Equity Requirement (15%)
Total project cost: $500,000
Required equity: $500,000 × 15% = $75,000
Initial Disbursement Calculation
Total initial needs: $265,000
Less borrower equity: $75,000
Initial disbursement: $190,000