Hard Money Basics
Loan-to-Value (LTV) Explained
No jargon and no sales pitch. This is how we explain it at the Averlend desk, with the math that matters.
Hard Money Basics
The short version, then the substance.
Key Takeaways
- The formula
- Why lenders cap it
- LTV vs LTC
The formula. LTV is the loan amount divided by the asset value. Borrow $180,000 against a $200,000 property and you are at 90% LTV. It is the single most important number in asset-based lending because it defines everyone's cushion.
Why lenders cap it. The gap between the loan and the value is the margin of safety. If the market dips or the project stumbles, that cushion is what protects both sides. Averlend lends up to 90% on strong deals, and the strength of the deal is what earns the top of that range.
LTV vs LTC. On rehab deals you will also hear loan-to-cost: the loan against purchase plus rehab. A deal can look fine on cost and terrible on value, or the reverse. We look at both, and so should you.
The South Texas angle. Averlend underwrites this every week in Corpus Christi and across Nueces County. If you are working a deal in downtown or anywhere else in the metro, the theory above comes with a local desk attached: see our Corpus Christi lending page or send the deal directly.
Questions
Quick answers from the Averlend desk.
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