–Hard Money LTV Ratios – The First Qualifier For Private Commercial Lending. 

Thinking about applying for a private commercial mortgage loan? You should know Hard Money LTV ratios or “Loan-to-Value” ratios lenders use, and what to expect when applying for a commercial hard money loan. 

Keep in mind that private “hard money” commercial lending is equity based lending whereby the lender makes a loan based on a percentage of the property value. Hard money LTV ratios are much lower than in conventional Lending to minimize risk to the lender.

Land – Hard Money LTV Ratios for land is about 50%

Land loans are much more difficult to get funded today than they were just last year. Many lenders who gladly approved land loans in the recent past shun them now. Raw land loans are virtually impossible to get now-a-days, but if you have a piece of commercial property that is zoned and approved for development you can expect to be approved for a loan based on the hard money LTV ratios of about 50%.

Improved Land – Hard Money LTV Ratios for improved land is about 60% 

Improved land is simply land with buildings on it. If the buildings are in decent shape but are vacant or under-performing then hard money LTV ratios in the 60% range is reasonable.

Income Producing Buildings – Hard Money LTV Ratios for income producing properties are about 65%. 

Income producing buildings are the favorite assets of the private commercial mortgage lender. If you own, or are lucky enough to be acquiring a building with positive cash-flow, you should be approved for a loan of about 65% of the property value. Maybe a bit more if you’re looking for a refinance loan.

Construction – Hard Money LTV Ratios for for construction is about 70% 

Private development money is quite hard to come-by in this credit market and if you do find a willing lender, be ready for the fact that most hard money construction loans are written for about 70% of the projects cost. The sponsors (borrowers) are going to have to come up with the other 30%.

Privately funded “hard money” commercial mortgage loans are an indispensable part of commercial real estate lending today. But they don’t call it hard money for nothing. Rates start at 10% and go up fast, broker and lender points will be added to the loan and the hard money LTV ratios are usually lower than the borrower would like. When you need one, however, you’ll be glad hard money lenders are there, ready and willing and able to write checks to quickly fund your hard money loan.

Ray Wateska and Westshore Mortgage & Investments Co., Inc. are Federally registered with the National Mortgage Licensing System (NMLS) and State Licensed through the Florida Office of Financial Regulation (FLOFR). Together, they have been providing commercial hard money loans since 1993. Contact Ray with your questions about hard money LTV ratios for your property or project.