Hard Money Commercial Mortgage Loans – Typical LTV Ratios – “What Size Loan Can I Get”?
Commercial mortgage loans are increasingly becoming popular on a daily basis. This can be attributed to the numerous advantages that are associated. Most importantly, they are generally said to be more secure than most regular loans. They are mainly said to be more secure than regular loans because they are secured by property. Put simply, the commercial property belonging to the borrower is used as collateral. The lender is free to recover the funds in case of a default.
Commercial mortgage loans may be issued by the bank or private lenders. In the latter case, they are often referred to as hard money loans. Before you can get a hard money commercial mortgage loan, you may need to take into account a number of issues. In particular, you have to take into account the actual value of your property. This has a huge impact on the amount of money that a lender can issue out as a loan. Perhaps it is time to take into account the process leading to deciding how much money you can borrow in the form of a commercial mortgage loan.
The LVT ratio
In general, commercial mortgage loan lenders often use the LVT ration to determine how much money a specific borrower can be given as a loan. This is the most important ratio in as far as commercial mortgage loans are concerned. The LVT ratio is the ratio of the ratio of a loan borrowed to the value of an asset or property that has been purchased by means of the loan. LVT simply means Loan to Value and it is a value that lenders are usually interested in prior to issuing out a commercial mortgage loan of any value.
Significance of the value
The LVT ratio is very important to both the lenders and the borrower. For example, a borrower who uses a loan of $120, 000 to purchase a property worth $150, 000 will have an LVT ratio of 80 %. The remaining 20 % refers to the lender’s haircut.