85% loan-to-cost construction financing is the line where commodity lending ends and structured capital begins. Anything below 75% LTC is widely available from regional banks, debt funds, and credit unions. Anything above 80% LTC requires a sponsor profile, asset class, and structure that most lenders won't touch — but there's a defined market for it if you know where to look.
Who actually quotes 85% LTC
- Private debt funds with construction-specific mandates — typically $5M–$50M loan size, 9–11% IO, 18–30 month term
- Specialty construction lenders running a senior + mezz stack — senior 65–70% LTC at 7–8%, mezz to 85% LTC at 12–14%, blended around 9.5%
- A handful of balance-sheet banks for sponsors they've closed with before — typically capped at 80% LTC with full recourse
- Family-office direct lenders for ground-up multifamily and BTR in supply-constrained markets
- Capital partners orchestrating senior + preferred equity (technically not 85% LTC debt, but the borrower's cash-in basis lands at 15%)
What gets you to 85% LTC
Three things make 85% LTC feasible: sponsor track record, asset class, and GC quality.
Sponsor track record means 2+ comparable completed projects in the last 5 years — same product type, similar scale, same geography. A sponsor with five completed 100-unit multifamily projects in Florida can get 85% LTC on a sixth. A sponsor who has done office tenant improvement work but is now pitching a 150-unit ground-up cannot.
Asset class matters because lenders price construction risk per product. Multifamily, BTR, and industrial warehouse get the most favorable LTC ceilings (lenders trust the lease-up math). Condo, hospitality, and ground-up office face structural caps at 70–75% LTC even for strong sponsors. Mixed-use lands between, depending on the unit mix.
GC quality is the underwriter's hidden lever. A bonded, licensed GC with comparable project completions and a clean lien history can move LTC up 5 percentage points on the margin. A new GC, an owner-builder, or one with unresolved disputes triggers conservative LTC.
Typical pricing at 85% LTC
- Blended rate: 9–12% (depends on senior/mezz split and sponsor strength)
- Origination fee: 1.5–2.5% (often split senior/mezz)
- Exit fee: 0.5–1% on take-out refinance
- Term: 18–30 months with 6–12 month extensions
- Interest reserve: built into loan amount (not paid current)
- Recourse: partial or burn-off — full recourse during construction, falling to non-recourse at certificate of occupancy + DSCR threshold
Why most lenders cap at 75% LTC
Construction risk is non-linear above 75% LTC. Cost overruns of 5–10% are routine — at 75% LTC the sponsor has 25% equity to absorb them. At 85% LTC, a 10% cost overrun wipes out two-thirds of the sponsor's equity before completion, which means the deal becomes a partial workout and the lender's last-dollar position is in trouble.
Banks operating under regulatory capital frameworks also face concentration limits on high-LTC construction loans. Most can do a few 80%+ LTC deals per year and then have to refuse the next one regardless of sponsor quality. Private debt funds don't face that constraint, which is why they dominate the 80%+ LTC segment.
What to bring when you ask for 85% LTC
Sponsor schedule with comparable completed projects (addresses, cost basis, exit), GC bond and license, signed contract or detailed budget with contingency line item, third-party feasibility or appraisal supporting as-complete value, take-out commitment or refinance path with realistic DSCR math at exit pricing. A 75% LTC ask gets a term sheet on a half-page submission. An 85% LTC ask needs a full sponsor book.