How much will a hard money lender lend on a property?
A hard money lender will typically lend 65 to 75 percent of the property's current value, and on a rehab project up to 85 to 90 percent of the purchase price plus 100 percent of the renovation budget, capped at 65 to 75 percent of the after-repair value. The lowest of those limits sets the loan.
The three limits
| Limit | Typical range | What it measures |
|---|---|---|
| Loan-to-value (LTV) | 65 to 75 percent | Loan against current as-is value |
| Loan-to-cost (LTC) | 80 to 90 percent | Loan against purchase price plus rehab budget |
| Loan-to-after-repair-value (ARV) | 65 to 75 percent | Loan against the appraised value once work is complete |
Ranges vary by lender and by borrower experience. The loan is sized at the lowest of the applicable limits.
A worked example
Purchase price $400,000, rehab budget $100,000, after-repair value $650,000.
- 90 percent of cost: $450,000
- 70 percent of ARV: $455,000
- Loan: $450,000, the lower number
- Your cash: $50,000 down plus closing costs, points, and working capital to front the first draw
If the ARV were $600,000, 70 percent is $420,000 and the loan drops to that, so you bring $80,000.
What raises or lowers your leverage
Experience. First-time borrowers often cap at 80 percent of cost and 65 percent of ARV. Experienced borrowers reach 90 and 75.
Credit. Not a primary factor, but scores under 620 often cost five points of leverage.
Property type. Single-family and two to four units get the highest leverage. Mixed-use, five-plus units, and land get less.
Market. Slow or rural markets get lower leverage.
Rehab intensity. Structural or additions get less than cosmetic work.
Why lenders cap at ARV
The after-repair value is the lender's protection if the project fails. Keeping the loan at 65 to 75 percent of ARV means the lender can sell an unfinished or finished property and recover the balance. That is also why the ARV appraisal matters so much: a low ARV shrinks the loan even if the purchase is a bargain.
Supporting the value
Provide comparable sales for the finished product, a detailed scope with a line-item budget, and photos. Lenders and appraisers work from what you give them. A scope that says "full renovation, $100,000" gets less credit than one that itemizes kitchen, baths, roof, and systems.
How CommFi handles it
Our lending desk sizes the loan against all three limits and shows you the cash required before you commit. It funds direct when it fits, and when a lender with higher leverage for your experience level is the better match, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. Zero upfront fees.
Related reading
Related questions
- What is the maximum LTV on a hard money loan?
- Typically 65 to 75 percent of current value, and 65 to 75 percent of after-repair value on rehab projects.
- Will a hard money lender finance 100 percent of the rehab?
- Often, yes, as a holdback released in draws, as long as the total loan stays under the loan-to-cost and ARV caps.
- Can I get 100 percent financing with hard money?
- Rarely. A few lenders offer it to experienced borrowers with cross-collateral. Most require 10 to 20 percent of cost from you.
- What is ARV?
- After-repair value, the appraised value of the property once the planned work is complete. Lenders cap the loan at 65 to 75 percent of it.
- Why did my hard money loan come in lower than I expected?
- Usually because the ARV appraisal came in under your estimate or the lender's cost cap was lower than the quote assumed.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.