LTV ARV and hard money explained

LTV stands for loan-to-value ratio and is a financial metric used by lenders to assess the risk of a loan. The LTV ratio represents the percentage of the property's value that the lender is willing to lend to the borrower. For example, if a lender is willing to lend up to 70% LTV on a property valued at $100,000, the borrower could receive up to $70,000 in loan funds.

ARV, on the other hand, stands for after-repair value and is a measure of the expected value of a property after it has been repaired or renovated. For example, if a property is currently worth $100,000 in its current condition but is expected to be worth $200,000 after $50,000 in repairs and renovations, the ARV would be $200,000.

In qualifying for a hard money loan, both LTV and ARV are important metrics that are used by lenders to assess the risk of the loan. Lenders will typically determine the loan amount based on a percentage of the ARV, with most lenders offering between 60-75% of the ARV. The LTV ratio will then be calculated based on the loan amount and the current or expected value of the property.

In summary, LTV and ARV are both important metrics used in qualifying for a hard money loan, with ARV used to determine the loan amount and LTV used to assess the risk of the loan. It's important to understand both metrics and carefully consider the costs and risks associated with a hard money loan before deciding if it's the right option for your financing needs.