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What is a Loan to Value Ratio?

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  • What is a loan to value ratio?
    This is simple enough to understand. The loan to value ratio is the dollar amount of the loan divided by the value of the property. As an example, a $65,000 loan on a property worth $100,000 would be a 65% LTV.
    Typically lenders will have a property appraised and lend off of the value given in the appraisal.
  • How to work out a loan to value for a hard money loan?
    As previously mentioned, most lenders will only move forward with an appraisal in hand. However, there are some lenders, including H&O Capital Funding, that rely on their own valuation instead. Depending on the property type, there are a few different ways to determine the value of a property.
    Some properties in certain areas trade on a per room, per unit or even per Gross SF (square foot) basis. Large apartment buildings of 8 units or more typically are valued using this method. An example would be 70% LTV loan on a 10-unit apartment building using $100,000/unit as the valuation. In this case the loan would be $700,000.
    Commercial properties (either office or retail) are generally valued using the income approach, wherein the
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blanket mortgage

$2,700,000 Blanket Mortgage – Mixed-Use & Multi-Family Properties in Jersey City, NJ

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$2,700,000 Blanket Mortgage – Mixed-Use & Multi-Family Properties in Jersey City, NJ

In this deal, a real estate investor came to H&O Capital Funding looking for a loan across three properties in the heart of a revitalized Jersey City. Having long ago acquired the properties for a song, the borrower needed a cash out refinance to finish off renovations on one of the properties and use the extra proceeds as down payment for another investment. The three properties consist of a mixed-use building with a booming day-care business and four apartments, a fully leased four-family home and another four-family home currently undergoing renovation. The deal ran into a bit of a snag as it didn’t seem there would be enough equity to meet the borrower’s needs, however, H&O was able to get creative and add a lien on the borrower’s own residence, which was already on the market for sale. Despite delays on the appraisals and a few other hiccups, H&O was able to close the deal in just under four weeks.

For more information on loans that we offer, visit our website.…

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First Mortgage Loan

$500,000 First Mortgage – Yonkers, NY – 7-unit Apartment Building

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$$500,000 First Mortgage – Yonkers, NY – 7-unit Apartment Building

H&O Capital Funding was contacted by a local broker who was beginning to do his own investing in real estate. The broker found a great off-market deal for a 7-unit apartment building near downtown Yonkers but needed to close ASAP. Familiar with H&O Capital Funding, he knew we would be able to get the first mortgage loan done in time for the closing. Two weeks later, the new investor closed the deal and now has himself a well maintained 7-unit building to start his portfolio.

For more information on loans that we offer, visit our website.…

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Investment home

$310,000 First Mortgage – New Rochelle Two-Family Investment Home

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$310,000 First Mortgage – Two-Family Investment in New Rochelle, NY

H&O Capital Funding was contacted by a local investor who needed some quick funds to payoff their current first mortgage. The home was in great shape, but the borrower had a rocky relationship with his current lender. Despite numerous obstacles posed by the current lender, H&O Capital was still able to get this done within 35 days. Had the current lender not held the deal up it could have been closed in under two weeks. Glad we were able to help with this two-family investment home.

For more information on loans that we offer, visit our website.…

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Commercial Real Estate Market

H&O Capital Funding 2017 Recap

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How Many Loans Did you Close?

2017 was a great year for H&O Capital Funding. H&O funded thirty-two loans this year, for a total dollar amount of just shy of $24 million. The loans ranged from as small as a $125,000 second mortgage up to a $4.25 million blanket loan on multiple residential investment properties.

What kinds of loans?

H&O saw a variety of loans this year. Everything from cash-out refinances to small second mortgages. There were also some creative loans to properties with multiple uses that required a few different liens to accomplish. The bulk of the year consisted of your typical first mortgages but there are always some unique deals and 2017 was no different. One theme ringing true in nearly all of the loans H&O funded this year was a need for speed. Borrowers with TOE closings, payoff expiration dates, etc. flocked to H&O Capital to get their deals done in time. In fact, H&O closed a small loan in Westchester County in just two days!

What kind of clients?

From seasoned developers to first time investors, H&O Capital saw the gamut of real estate players looking for loans in 2017. There were a number of borrowers …

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Blanket First Mortgage

$1,300,000 Blanket First Mortgage – Yonkers, NY & Hartford, CT

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$1,300,000 Blanket First Mortgage – Multi-Family Properties in Yonkers, NY & Hartford, CT

In this deal a repeat borrower with H&O Capital Funding was back for another loan on some new properties he recently acquired in Hartford, CT. The borrower purchased a note that was in default on 5 multi-family properties up in Hartford, CT. After going through the foreclosure process, taking possession of the properties and doing some minor renovation work, the borrower reached out to H&O for a cash out loan as he has some new deals in the pipeline. For additional collateral the borrower put up a 3-family home in Yonkers, NY that he owned free and clear. H&O was able to close the loan in under three weeks, freeing up cash for some new year deals the borrower was looking at.

For more information on loans that we offer, visit our website.…

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Who Funds Hard Money Lenders?

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Where do Hard Money Lenders get their Funding?

Hard Money Lender funds come from one of three sources. Personal funds, a portfolio of investors or a public fund with money raised from many different investors similar to a REIT.

The first, a lender who uses personal funds, is likely the rarest. There simply aren’t that many lenders out there with enough personal funds to meet the demand for their service.

The second, a lender who has a portfolio of investors for each deal, is fairly common. These lenders generally have a pool of investors they can bring each deal to. The investors will then decide whether or not to invest in the deal as presented by the lender. Some lenders who use this method can have trouble raising funds for certain deals and may make promises to a borrower that they can’t keep. However, most of these lenders have investors who trust their judgement and jump at the chance to invest in any loan the lender brings them.

The third, a lender who raises funds from many different investors to create a pool of money or “fund” that they then lend out of. These lenders are becoming more and more …

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Pros and Cons of a Hard Money Loans

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Hard Money Loans Requirements

Conventional Lenders and Hard Money Lenders actually have surprisingly similar loan requirements. Both types of lenders rely heavily on the loan to value ratio, however, one con for conventional lenders is that they also go through borrowers’ personal financials including credit scores. While this may be a pro for hard money lenders as they do not ask for financials and credit scores, this extra security for conventional lenders allows them to typically lend up to a higher loan to value ratio than a hard money lender.

Timing

If you are looking to close a deal quickly, look no further than a hard money lender. They specialize in speed and can generally get deals closed in 30 days or less whereas a conventional lender needs at least 60 days to be able to close. A pro for hard money lenders.

Flexibility

As one might imagine, conventional lenders are governed by much stricter federal and state laws, as well as their corporate governance. We all know the saying, “think outside the box,” but this is exactly what a conventional lender cannot do. They work within specific boxes with specific criteria and the loans they do must be able …

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Why are smaller mortgages more difficult to get than larger mortgages?

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Two big reasons lenders prefer larger mortgages are:

Dollar amount of Equity
For your typical lender, foreclosure is a worst case scenario and one where the lender could end up losing money if their borrower is overleveraged. That’s why the Loan to Value ratio is so important. In the event of a foreclosure, the lower the LTV ratio the more comfortable a lender is that they will be made whole. If a borrower has enough equity in the property they are much more likely to either refinance with another lender or sell the property to make the current lender whole. Makes sense, right? The problem with smaller loans is that even at low LTV ratio levels (40-60%) there just isn’t a lot of equity in terms of actual dollars to make a lender comfortable. Here’s an example:

Scenario 1: LTV Ratio is 50%, property is worth $500,000, total equity in the property is $250,000

Scenario 2: LTV Ratio is 50%, property is worth $50,000, total equity in the property is $25,000

In Scenario 1 a lender feels very comfortable with their loan amount. Even if they have to go through the entire foreclosure process and take the property in, there …

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$1,170,000 First Mortgage – Single Family Investment Property on Long Island

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$1,170,000 First Mortgage – Single Family Investment Property – Roslyn, NY

In this deal the borrowers were a couple from California who were looking for a loan on a single family investment property on Long Island. The borrowers had struck a good deal on the home but had committed to closing in 30 days. Their conventional lender couldn’t get it done in a timely fashion and so they turned to H&O Capital Funding to solve their problems. H&O was able to get them the funds they needed to close in plenty of time. Smooth sailing for another borrower in need.

For more information on loans that we offer, visit our website.…

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Phone No:

914.620.6432

Email:

commercial@hom-realestate.com

Address:

133 Parkway Rd., Bronxville, NY 10708

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