Loan-to-value (LTV) is a crucial metric in hard money lending, determining how much financing an investor can secure relative to the property’s value. Typically, hard money lenders offer LTV ratios between 60% and 75%, meaning that borrowers must contribute some equity to the deal. For example, if an investor is purchasing a $500,000 property with a 70% LTV loan, they would be required to provide a $150,000 down payment while the lender finances the remaining $350,000. LTV plays a critical role in risk management, as lenders use it to ensure they are adequately protected in case of loan default or property devaluation.
A lower LTV ratio generally results in better loan terms, such as lower interest rates and reduced fees. Investors should carefully evaluate their LTV needs when structuring a deal, as borrowing too much could lead to higher carrying costs, while borrowing too little might limit their ability to complete necessary renovations. Green Everest works with investors to identify the best LTV structure based on their project goals and risk tolerance. Understanding LTV can help investors make more informed decisions, ensuring they maximize leverage without overextending financially.
I would always here LTV and not understand what it means, thank you for this!
thanks for explaining how much down i would have to bring
Very good
This makes it clear why hard money lenders don’t go up to 90% like traditional banks—it’s all about managing risk on both sides.
I didn’t realize that a lower LTV could actually get you better loan terms. Definitely something to consider when budgeting for a project.