Hard Money Loans and LTV – A Simple Guide for Real Estate Investors

In real estate, timing is everything. The right opportunity can come and go in the blink of an eye, and if you cannot move fast enough, someone else will. Maybe you have your eye on a great fix and flip, you are in between selling one property and buying another, or you are mid a rehab or construction project and need more cash out to complete the project. In any of these situations, the speed of your financing could be the difference between winning and losing the deal.

That is where hard money loans step in! These loans are designed for speed and flexibility, two things traditional banks often cannot provide. They focus less on credit scores and stacks of paperwork, and more on the property itself and the strength of the deal. This approach makes them an attractive choice for investors who need to move quickly and think creatively. But there is one factor in hard money lending that you really need to understand before jumping in: the Loan to Value ratio, or LTV.

Think of LTV as the percentage of a property’s value that a lender is willing to finance. It is calculated by dividing the property’s value by the loan amount. For example, if you want to borrow five hundred thousand dollars on a property worth eight hundred thousand dollars, your LTV is sixty two point five percent. This number matters because it tells the lender how much equity you have in the property, and the more equity you have, the less risk they take on.

Each individual private money lender may have their own average LTV they like to work in, but typically LTVs in the range of sixty percent is a decent investment, of course depending on the type of property and the project. A fix and flip might get you closer to seventy five percent if the numbers make sense. A bridge loan could be around sixty five to seventy percent. New construction often sits lower, around sixty to sixty five percent, because unfinished projects carry more risk. These limits are not meant to slow you down; they are in place to keep the deal balanced for both you and the lender.

The beauty of hard money lending is that it is built to work around real-world situations. Maybe you are taking on a property that needs a lot of work, or you have a short window to close before another buyer jumps in. Hard money loans can be customized to fit your project’s timeline and goals, with terms that work for your exit strategy, whether that is selling the property or refinancing into a long-term loan later.

If you want to improve your LTV and get better loan terms, you have a few options: You can increase your down payment to bring the ratio down, look for properties that are undervalued but have strong resale potential, or partner with a lender who knows your local market inside and out. The right lender can move quickly, tailor terms to your needs, and help you make the most of every opportunity.

Bottom Line

At the end of the day, hard money loans are about giving you the speed and flexibility to take action when the perfect deal comes along. Understanding how LTV works puts you in a stronger position to make that deal happen.

If you need help navigating real estate financing, whether you are looking to purchase, explore trust deed investing, or want guidance on your next home move, we are here and ready to help. Pacific Direct Mortgage is a Santa Rosa, California Private Money direct lender offering hard money loans for single family, multi family, and investment real estate throughout California and Sonoma County.

Ken & Ari Walker

Husband & Wife Team Phone: 707‑708‑0797 / Office: 1400 N. Dutton Ave #22 Santa Rosa, CA 95401 Ken: CA DRE Broker #01858042 / NMLS #1221130 Ari: CA DRE #01858152 / NMLS #2170867 Ken & Ari are a husband & wife team with combined 3+ decades in real estate and private money industries. They own Pacific Direct Mortgage & Real Estate, specializing in Private Money loans (also known as Hard Money home loans). Having helped thousands of Borrowers & working directly with Brokers, Agents and Lenders to help when needed with fast, flexible, alternative financing for real estate purchases and refinances throughout California. No issues with DTI ratios, credit issues, property condition, difficult to prove income ‑ we want to help!