What Is Loan-to-Value (LTV) in Hard Money Lending? #

Loan-to-Value, or LTV, is a key metric lenders use to decide how much money they will provide for a real estate project. It compares the loan amount to the property’s value, giving lenders a way to measure risk and giving investors a clear picture of how much capital they need to contribute.

How Loan To Value Is Calculated #

The calculation is straightforward: divide the loan amount by the property’s value. For example, if a lender provides a $150,000 loan on a property worth $250,000, the LTV is 60 percent.

Why Loan To Value Matters to Investors #

The lower the LTV, the less risk the lender is taking on, and the more equity the borrower is expected to bring to the table. Hard money lenders often allow higher LTV ratios than traditional banks, but they rarely fund 100 percent of a purchase. Common LTV ranges in hard money lending are 65 to 75 percent of the property’s current or after-repair value.

What Investors Should Keep in Mind #

• Higher LTV means you contribute less upfront but may face higher rates.

• Lower LTV means you contribute more equity but may receive better terms.

• LTV is only one part of the deal — lenders also look at ARV, exit strategy, and reserves.

• Understanding your required equity helps you plan cash flow and manage multiple projects.

Summary #

Loan-to-Value (LTV) shows how much of a property’s value a lender is willing to finance. By knowing the LTV upfront, investors can plan their equity contribution, evaluate risk, and make smarter decisions when using hard money loans.