Hard money loans are short-term financing typically used for real estate investments. They are issued by private lenders rather than banks or other institutional lenders. The loan-to-value (LTV) ratio for hard money loans is generally more conservative than traditional mortgages. This is because hard money lenders view the property as the primary source of repayment rather than the borrower’s income or credit.
While LTV requirements can vary by lender, here are some typical ranges for hard money loan LTVs:
- Fix-and-flip loans: 65% – 75% LTV
- Long-term rental property loans: 65% – 80% LTV
- New construction loans: 60% – 65% LTV
- Land loans: 50% – 65% LTV
The maximum LTV is influenced by the property’s condition, location, marketability, and the borrower’s experience. Lenders are more conservative and have higher-risk properties or borrowers.
It’s common for hard money lenders to keep LTVs relatively low to protect themselves if they need to foreclose and sell the property quickly to recoup their investment.
So, in summary, while traditional mortgages can have an LTV of 80% or higher, hard money loan LTVs typically max out between 50% and 80%, depending on the specifics of the deal. Lower LTVs reduce the lender’s risk. For more information, check out Lending Network at https://www.lendingnetwork.org/