When it comes to hard money loans, one term brokers and investors hear constantly is Loan-to-Value ratio, or LTV. This metric plays a central role in determining loan approval, risk assessment, and the terms borrowers receive. Understanding LTV can help brokers better advise clients and investors make smarter financing decisions.

Let’s break down what LTV is, why it matters, and how it affects hard money lending.

What is Loan-to-Value Ratio?

Loan-to-Value (LTV) is a percentage that compares the loan amount to the value of the property being financed. In simple terms, it tells lenders how much they’re lending compared to the property’s value.

Formula for LTV:

LTV=(Loan AmountProperty Value)×100LTV = \left( \frac{\text{Loan Amount}}{\text{Property Value}} \right) \times 100LTV=(Property ValueLoan Amount​)×100

For example:

  • If a borrower seeks a $500,000 loan for a property valued at $1,000,000, the LTV would be 50%.
  • If they seek $700,000 for the same property, the LTV would be 70%.

Why is LTV Important in Hard Money Lending?

LTV helps lenders assess the risk of a loan. A lower LTV indicates more equity in the property and less risk for the lender. Conversely, a higher LTV means less borrower equity and higher lender exposure.

Key Points for Brokers:

Low LTV (50–65%): Easier to secure approval and better loan terms.
High LTV: Above 70%, probably resulting in high interest rates or the need for a bigger down payment.

How Hard Money Lenders Use LTV

Hard money lenders, unlike traditional lenders, do not stress so much over credit scores and income. The main focus is on the property and the value it holds. Here are some important roles of LTV:

  • Decision to Approve: Most hard money lenders, one of them being Lending Bee, have a ceiling for LTV around 65-70%. This keeps the loan well covered with equity.
  • Interest Rates: Lower LTVs generally get better rates, whereas higher LTVs have higher rates as their premiums to compensate for the risk.
  • Loan Terms: With regard to properties having high LTV, they could mandate more restrictive terms such as shorter loan duration and additional collateral.

LTV in Varying Scenarios

The requirement for LTV may vary depending on property types and loan purposes. Here is how this generally works:

Fix-and-Flip Projects
The lender can consider the After-Repair Value (ARV) of the property in addition to its current value. For instance:

Current property value: $400,000
ARV after renovations: $600,000
Lender provides a loan of $300,000, 50 percent of ARV, to make the deal safer.

Cash-Out Refinancing
For cash-out refinancing, the LTV is based on the existing value rather than ARV. For example, if a client owns a property valued at $1,000,000 and requests a loan for $650,000, the LTV is 65%, which is usually within the threshold that most lenders would approve.


New Purchase
For property purchases, LTV centers around the purchase price or current market value. The lower the LTV in this regard, the stronger the equity position of the borrower, and thus it is a more comfortable position for lenders.

Why LTV Matters to Borrowers

To the borrower, understanding LTV can secure better loan terms. Here is how:

  • Smaller Down Payments: A low LTV may enable a borrower to negotiate smaller initial payments.
  • Reduced Risk: Staying within the sweet spot for the lender’s preferred LTVs-50-65%-will reduce the risk of getting an application declined.
  • Better Profit Margins: In fix-and-flip projects, an affordable LTV can make or break profitability.

Helping Clients Prepare for LTV Requirements

As a broker, helping your clients to manage their LTV could well be the difference between approval and rejection. Below are actionable tips:

  • Larger Down Payments: This decreases LTV and comforts lenders.
  • Document Property Value Thoroughly: The more solid the appraisals and comparable sales data, the better the case for a favourable LTV.
  • Highlight Value-Add Opportunities: If it’s a fix-and-flip project, demonstrate clear renovation plans with increased ARV.
  • Keep Other Debt Low: Borrowers that keep outstanding loans low appear less risky.

How Lending Bee Simplifies the LTV Process

Here at Lending Bee, we pride ourselves on being transparent and flexible. Here’s how we do LTV:

  • Clear Guidelines: We cap LTV at 65–70% depending on property type, ensuring safety for both parties.
  • Value Addition: The current value of the property and ARV for a fix-and-flip project are assessed, and solutions are provided for the same.
  • No Surprises: Because we manage our own funds, we can make fast and confident decisions regarding LTV and other loan terms.

Our team works closely with brokers and clients to address any LTV concerns, providing guidance and rapid approvals.

Success Story: Converting a High LTV into a Win

Recently, one of our brokers referred a client who required a $750,000 loan to purchase a multi-family property in Sacramento. The value of this property was $1,100,000, which provided an LTV of about 68%.

Due to great documentation and a well-defined renovation plan, the loan was approved by Lending Bee within five days. The client completed renovations, increased property value, and refinanced the property within eight months with a decent profit.

This success demonstrates not only how understanding LTV but also working with a responsive lender can lead to great outcomes.

Final Thoughts: Why LTV Matters

LTV is more than just a number. To brokers, it’s a powerful tool with which to help clients position their applications and secure favorable terms. To borrowers, it’s the key to unlocking reliable funding and managing risk.

At Lending Bee, we know how important LTV is when dealing with hard money lending. Our conservative approach and concentrated involvement with our clients ease the navigation process and get you the outcome needed.

Need help with a deal? Reach out today to see how we can collaborate.