Many lenders require that certain loans be secured with collateral. The actual value of the collateral (usually a property) is used in combination with a variety of factors, such as creditworthiness, to determine how much money a creditor feels comfortable lending you. You’ve probably encountered the term “loan-to-value ratio”, and may be wondering what that means.
What is Loan-to-Value Ratio in a Hard Money Loan?
The loan-to-value ratio (LTV) is a method of determining what percentage of a property’s value can be issued as a loan. The formula is fairly straightforward. Say a property is worth $210,000, and you need to borrow $176,000. You simply divide the desired loan amount by the property value, and the resulting percentage is your LTV:
LTV = 176,000 / 210,000
= 0.84, or 84 percent
Obviously, not every lender would be as comfortable with an 84 percent LTV. Higher LTVs are usually reserved for long-term loans, such as traditional mortgages, that incur less risk to the lender. For shorter loans or projects that carry some risk, a lower loan-to-value ratio is standard, most likely in the 60 percent to 70 percent range.
Why Use Hard Money?
For many people, the best choice is to use a hard money loan through Paces Funding. That’s because you can use a hard money loan to buy a non-owner-occupied residential or commercial property from Atlanta to Nashville, or in Florida or the Carolinas.
You’ll get cash fast and close quickly, which means you won’t have to miss out on a deal because you’re waiting for financing to come through.
Do You Need a Hard Money Loan?
Don’t be fooled by our competitors. We are the TOP hard money lender in Georgia, North Carolina, South Carolina and Nashville, TN. Apply for a hard money loan here or click through our site to find out how we can help you now!