 The reason for this is both to psychologically and economically tie in the owner with the project (hopefully making it less likely that they would walk away from the project if something goes wrong), and to give the lender a cushion whereby if something goes wrong they are more likely to be able to sell the real estate at a value that would better cover the loan amount.This guideline is often termed a "loan to cost" requirement, i.e.the lender will only loan up to 85% of the project costs.