LTV (Loan to Value)
The LTV is probably the most critical of all the criteria. Since the hard money lender is looking to the property as the ultimate source of repayment, he wants a margin of safety and will loan only a percentage of the property value, typically 50-65%, depending on the lender. If the borrower is planning to use some or all of the loan proceeds to improve the property, the lender may consider the ARV (after repair value) in addition to the current value or purchase price.
Lien Position
Because of the uncertainty in today's real estate market, most hard money lenders are not making second mortgages and will require that their loan be a lien in first position. The loan will be secured by deed of trust and recorded to securely establish that position.
Term
Hard money lenders make short-term loans, typically 6 months to 2 years. Terms of longer duration may be possible or extension provisions inserted into the loan documents in certain situations.
Interest Rate
The interest rate will vary according to the lender's desired return on investment and on the rate being charged by competing hard money lenders making loans on similar properties.