Thinking about applying for a private commercial mortgage loan? You should know what LTV or Loan-to-Value ratio you could expect to be approved for.
Keep in mind that private hard money commercial lending is equity based lending. LTVs are much lower than in conventional Lending.
Land loans are much more difficult to get funded today than they were just last year. Many lenders who gladly approved land loans in the recent past shun them now.
Raw land loans are virtually impossible to get now-a-days, but if you have a piece of commercial property that is zoned and approved for development you can expect to be approved for a 50% LTV loan.
Improved Land 60%
Improved land is simply land with buildings on it. If the buildings are in decent shape but are vacant or under-performing an LTV in the 60% range is reasonable.
Income Producing Buildings 65%
Income producing buildings are the favorite assets of the private commercial mortgage lender. If you own, or are lucky enough to be acquiring a building with positive cash-flow, you should be approved for a loan of about 65% of the property value. Maybe a bit more if youre looking for a refinance loan.
Private development money is quite hard to come-by in this credit market and if you do find a willing lender, be ready for the fact that most hard money construction loans are written for about 70% of the projects cost. The sponsors are going to have to come up with the other 30%.
Privately funded hard money commercial mortgage loans are an indispensable part of commercial real estate lending today. But they dont call it hard money for nothing. Rates start at 10% and go up fast, broker and lender points will be added and the LTVs are usually lower than the borrower would like. When you need one, however, youll be glad hard money lenders are there, ready and willing to write checks.