Is 65% LTV the new norm?

Question

I just got off the phone with my lender to refi my new property. The loan officer let me know that I would have to bring cash to the closing table because they are only lending at 65% LTV. Has anyone else been getting similar feedback from lenders? Any recommendations on good lenders?

Edward Brown · Answer

Refi 30 year fixed rate loan I even explored the option of a bridge loan and it's the same lending restrictions.

Andrew Postell · Answer

@Edward Brown I may have missed this....but is this for your permanent, 30 year fixed rate loan?  Or a temporary, acquisition style loan?

Mike Price · Answer

HM has been murdered by low liquidity and margin calls.  60-70% is the new norm.  Most of my lenders are at 70%.   The strength of the deal is a huge factor.

Aidan Mosher · Answer

I wouldn't say that 65% is the new norm for Hard Money, but the private money world is definitely tightening up. It's a supply and demand issue. Hard Money lenders have raised borrower equity requirements due to a shortage of available capital. The buyers of HM notes on the secondary markets have been disappearing at an alarming rate. The buying of these notes is what creates the liquidity that all lenders rely on to originate loans.

When the capital markets that fuel this industry freeze, there is just not enough money to continue business as usual. If a lender generally has $10mm/month to put to work and they suddenly have $2mm, they have to use that money very carefully.

I lend on rehab, new construction, and spec builds in Austin and San Antonio so I have been watching the Hard Money options very closely. You can definitely expect this conservative approach to continue for a while. Now is the time to get creative with deal structure. If you want to bring less cash to closing, try getting your seller to take a second lien behind your lender and get paid at the end. If you have a motivated seller then they will be happy to close a deal in this market. Even if they have to wait for some of their money.

Edward Brown · Answer

It's a single family property.

Shaun Weekes · Answer

What is your scenario?  If it's a 2 to 4-unit investment property and you're looking for cash out before 6 months, then 65% is the max Fannie and Freddie will lend under the delayed financing rule.  If it's after 6 months you're looking at 70% LTV.  Go ahead and give us some more detailed info and you'll get the answers you need.

I hope this helps and have a good one.

Stone Saathoff · Answer

Yes. I have gotten lots of feedback from about a dozen different lenders that they are sticking to 65% LTV. That's in regards to wholesale deals, single family to commercial. I work primarily with hard money lenders in the San Antonio and central Texas areas, but I have heard that same feedback from lenders that operate in many other states as well.