A loan-to-value or LTV ratio is a metric that compares the size of a loan to the value of the asset. Higher LTVs are generally riskier for lenders, and, for certain loans, can result in higher interest rates. When it comes to HUD 223(f) loans, HUD permits up to 85% LTV for market rate properties, up to 87% LTV for affordable properties, and up to 90% LTV for properties using rental assistance.
Loan-to-Cost Ratio, or LTC, is a measure of leverage defined as project’s financing compared to its construction costs. LTC is important for some kinds of HUD multifamily financing, including HUD 221(d)(4) loans and HUD 232 loans, but is not a relevant factor for HUD 223(f) loans, since these loans do not fund property construction or rehabilitation.