Learn To Be A Fix and Flip Investor: Here's How to Figure Out Your Loan-to-Value Ratio in Colorado

Sunday, April 28, 2019

Here's How to Figure Out Your Loan-to-Value Ratio in Colorado

Looking for funding for a fix-and-flip or a refinance? Your loan-to-value ratio in Colorado is incredibly important. Here's a simple way to figure it out.

If you've ever searched the internet to look for funding to buy a home, a commercial storefront, or an income property, you've probably come across the term "LTV." The mortgage industry is full of confusing code words and abbreviations. For newcomers, being inundated with this jargon can feel intimidating. Like most things, though, once you cut through some of the dense vernacular, it's not as complicated as it seems.

As an example, let's break LTV down right now. LTV is short for "loan-to-value ratio." It's the amount of the loan you're asking for compared to the value of the property you want to buy. In other words, it represents how much of the property you actually own versus how much you owe.

How to Calculate Your Loan-to-Value Ratio

Calculating your LTV is simple. To do it, simply divide the amount of the loan you're asking for by the value of the asset that's securing the loan (the property you're buying).

Example: Let's say you're looking to buy a property that's valued at $100,000. You have 15 percent of that in cash for a down payment, leaving you with the need to borrow the remaining 85 percent. In this case, your LTV ratio would be 85.

Those nice even numbers are easy to figure out in your head, but if things get a little more complicated, here's a simple trick: open Google, type amount you need to borrow, followed by a slash and followed by the value of the property and you'll get your LTV. In the above example, you would type in 85000/100000 and Google will spit out the answer: 0.85, which is 85 LTV.

Why Does LTV Matter?

It's simple. A higher LTV means a higher risk for the lender. Even Colorado Hard Money Lenders don't really want to take over your property; they want to be paid back in a timely manner. Also, if you have more of your own money invested in the property, you're more likely to have a vested interest in keeping it nice and making on-time payments.

It's not the end-all, but knowing your loan-to-value ratio in Colorado is an important factor in getting the funding you want. If you have questions about your LTV or anything else about Colorado Hard Money Loans, give us a call today!

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.