How to Secure a Rehab Loan with 90 Percent LTC for Flips

A rehab loan with 90 percent ltc is a short-term private money financing structure that covers 90 percent of the total project cost, meaning the lender funds the vast majority of the purchase price plus the renovation budget, leaving the real estate investor to cover only a 10 percent equity down payment. For real estate investors, flippers, and BRRRR operators, securing high-leverage debt is the single most effective way to scale a portfolio, as it preserves liquid capital for closing costs, carrying costs, and reserves. Rather than sinking 20 or 30 percent of the purchase price into a single distressed property, an investor utilizing a rehab loan with 90 percent ltc can spread their capital across multiple active projects.

This specific tier of high-leverage financing is designed primarily for experienced real estate investors and flippers who have a proven track record of successful exits. While some lenders may offer high leverage to newer investors with exceptionally strong credit and significant liquid reserves, 90 percent Loan-to-Cost (LTC) is generally reserved for operators who know how to manage construction crews, adhere to timelines, and accurately project an After Repair Value (ARV). It is also the preferred product for operators executing the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) because minimizing the initial cash outlay makes it significantly easier to pull all original capital back out during the refinance phase.

To understand how a rehab loan with 90 percent ltc actually works, you must look at the mechanics of the math and the two primary constraints lenders use to size your loan: the Loan-to-Cost ratio and the Loan-to-Value (LTV) ratio based on the ARV. Loan-to-Cost is simply the total loan amount divided by the total cost of the project. The total cost includes the purchase price of the distressed asset plus the hard costs of the renovation. It typically does not include soft costs like closing fees, lender points, or holding costs, which you must pay out of pocket.

Let us walk through a real-world numerical example. Suppose you find a distressed single-family property for a purchase price of $200,000. Your contractor bids the renovation at $100,000 in hard costs. Your total project cost is therefore $300,000. With a rehab loan with 90 percent ltc, the lender will provide a total loan amount of $270,000. This leaves you responsible for a 10 percent down payment, which equals $30,000.

However, lenders do not just hand you a check for $270,000 on the day of closing. Private money and hard money loans operate on a draw system. In most cases, the lender will fund a percentage of the purchase price at the closing table and hold the renovation funds in an escrow account. If the lender applies the 90 percent leverage evenly, they will fund $180,000 toward the $200,000 purchase price at closing, requiring you to bring $20,000 as your down payment on the acquisition. The remaining $10,000 of your required equity goes toward the first phase of construction. You will fund the initial demolition and framing out of pocket, and once that work is inspected and verified, the lender reimburses you from the $90,000 renovation escrow they are holding.

There is a second critical calculation that works in tandem with your rehab loan with 90 percent ltc: the ARV cap. Hard money and private lenders want to ensure there is enough equity in the finished property to protect their capital if you default and they have to foreclose. Therefore, they will cap the total loan amount at a specific percentage of the After Repair Value, usually 70 to 75 percent.

Returning to our previous example, your total loan amount is $270,000 based on a 90 percent LTC. If the appraiser determines that the After Repair Value of the completed home will be $400,000, your loan is at 67.5 percent of the ARV. Because 67.5 percent is well below the lender's 70 percent ARV maximum constraint, you will receive the full 90 percent LTC leverage. But what if the ARV comes back lower? If the appraiser says the home will only be worth $360,000 when finished, a 70 percent ARV cap restricts your maximum loan amount to $252,000. In this scenario, the ARV constraint overrides the LTC calculation. You will not get the full $270,000 you calculated. Instead, your loan is capped at $252,000, and your required cash out of pocket increases from $30,000 to $48,000. This dynamic is why buying right and accurately projecting your ARV is non-negotiable.

You should use a rehab loan with 90 percent ltc when you have identified a deeply discounted property, you have a reliable contractor ready to mobilize, and you want to keep your cash reserves intact for future acquisitions or unexpected holding costs. High leverage is an incredibly powerful tool in an appreciating or stable market where properties sell quickly, allowing you to pay off the short-term debt and realize your profit. It is also the ideal structure when your cash-on-cash return projections heavily favor putting less money down, even if it means paying slightly higher interest rates.

You should not use this aggressive high-leverage product if you are operating with dangerously thin profit margins. When you only put 10 percent down, you have very little equity cushion if the market shifts, if your contractor goes over budget, or if the property takes six months longer to sell than anticipated. Furthermore, 90 percent LTC loans carry higher monthly interest payments than lower-leverage loans. Private money rates typically range from 9 to 13 percent, and lenders charge 1 to 3 origination points at closing. A larger principal balance means larger monthly interest-only payments. If you do not have the liquid reserves to cover those monthly payments during a prolonged renovation, the high leverage that was supposed to help you scale will instead choke your cash flow.

The most expensive mistake investors make when securing a rehab loan with 90 percent ltc is failing to understand the mechanics of the construction draw schedule. Many novice flippers assume the lender will front the money for the contractor to begin work. This is entirely false. Lenders fund in arrears. You must complete a phase of the renovation, pay for it, schedule a third-party inspection, and wait for the lender to release the draw. This process can take several days to a week. If you empty your entire bank account to cover the initial 10 percent down payment and closing costs, you will have no working capital left to start the renovation. The project will stall immediately, but the monthly interest clock will continue ticking.

Another common pitfall is underestimating the holding costs associated with a high-leverage loan. While the lender covers 90 percent of the hard costs, you are entirely responsible for property taxes, insurance, utility bills, and the monthly interest payments to the lender. If your contractor finds structural rot that delays the project by three months, that is three extra months of interest payments you must make on a large principal balance. Investors who do not factor a robust contingency budget into their upfront calculations often find themselves scrambling for expensive gap funding to cross the finish line.

Furthermore, borrowers must be prepared for the underwriting scrutiny that accompanies 90 percent leverage. Lenders take on more risk when they fund 90 percent of a project, so they demand pristine documentation regarding the asset. This means they will require a detailed, line-item construction budget, a timeline for completion, and often a resume of your past projects. While the loan is underwritten primarily on the strength and profitability of the real estate asset rather than your personal income, your credit score and liquidity will absolutely be pulled to verify you can handle the remaining 10 percent equity requirement and the ongoing interest carry.

When you are ready to execute your next fix and flip or BRRRR project and need maximum leverage to preserve your capital, the application process relies on speed and accurate property data. You will need to provide the purchase contract, a detailed scope of work from your contractor, and your entity documents. The lender will immediately order an as-is and ARV appraisal to verify both the current value and the projected exit value. Once the numbers are validated against the LTC and ARV constraints, the loan can close in a matter of days.

Phoenix Capital's Renovation loan program is engineered specifically for active real estate investors who need reliable, high-leverage capital to execute their business plans without draining their liquidity. Our team understands how to underwrite both the acquisition and the construction phases efficiently, ensuring you have the funds you need at the closing table and a smooth, predictable draw process throughout the rehab. If you have a property under contract and want to see how the numbers stack up, navigate to /funding to submit your deal parameters. We will review your scope of work, analyze the local market data, and provide a clear term sheet detailing exactly how much leverage your project qualifies for.