𝗦𝗲𝗿𝗶𝗲𝘀: 𝗛𝗼𝘄 𝘁𝗼 𝗮𝗿𝗿𝗮𝗻𝗴𝗲 𝗴𝗿𝗼𝘂𝗻𝗱-𝘂𝗽 𝗖𝗥𝗘 𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴. 𝘊𝘢𝘱𝘪𝘵𝘢𝘭 𝘘𝘶𝘦𝘴𝘵 4 𝘰𝘧 ?

Sep 3 • General

𝗟𝗼𝗮𝗻 𝘁𝗼 𝗖𝗼𝘀𝘁 (𝗟𝗧𝗖) 𝘃𝘀 𝗲𝗾𝘂𝗶𝘁𝘆. 𝗣𝘂𝗿𝗰𝗵𝗮𝘀𝗲 𝗽𝗿𝗶𝗰𝗲 𝘃𝘀 𝗮𝗽𝗽𝗿𝗮𝗶𝘀𝗲𝗱 𝘃𝗮𝗹𝘂𝗲.

When a bank says they’ll fund up to 65% Loan-to-Value (LTV), the natural next question is: how do they calculate your 35% equity contribution?

Here’s the basic breakdown:

✅ 𝗦𝗼𝗳𝘁 𝗖𝗼𝘀𝘁𝘀 𝗖𝗼𝘂𝗻𝘁

All funds you’ve already spent on permits, engineering, architectural, and consultant fees can be credited toward equity.

✅ 𝗟𝗮𝗻𝗱 𝗖𝗼𝘂𝗻𝘁𝘀 𝗧𝗼𝗼… 𝗕𝘂𝘁 𝗧𝗶𝗺𝗶𝗻𝗴 𝗼𝗳 𝗣𝘂𝗿𝗰𝗵𝗮𝘀𝗲 𝗠𝗮𝘁𝘁𝗲𝗿𝘀

This is where it gets a little tricky:

◾ If you bought the land a year ago for $𝟭,𝟬𝟬𝟬,𝟬𝟬𝟬, lenders will usually only credit $1,000,000—even if today’s appraisal says it’s worth $𝟭.𝟱𝗠.

◾ Why? Most banks only “revalue” land if you’ve owned it for 𝟮𝟰+ 𝗺𝗼𝗻𝘁𝗵𝘀, at which point they’ll typically take the current 𝗮𝗽𝗽𝗿𝗮𝗶𝘀𝗮𝗹 𝘃𝗮𝗹𝘂𝗲.

✅ 𝗪𝗵𝗲𝗻 𝗧𝗶𝗺𝗲 𝗪𝗼𝗿𝗸𝘀 𝗶𝗻 𝗬𝗼𝘂𝗿 𝗙𝗮𝘃𝗼𝗿

If you bought a site 20 years ago for $500K, and it’s worth $2M today, that $2M appraised value becomes your 𝗲𝗾𝘂𝗶𝘁𝘆 𝗰𝗼𝗻𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻.

👉 The bottom line: Equity isn’t just about dollars spent—it’s shaped by timing, purchase history, and the bank’s rules. Understanding these nuances is key to validating a borrower’s pro forma and confirming they’ve met the required equity contribution to unlock maximum loan-to-cost (LTC).

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