Why Don’t 100 LTV Hard Money Lenders in Arizona Exist?

100 LTV hard money lenders in Arizona are a bit of a unicorn in the finance world. If you think you’ve found one, you’d better take a closer look.

If you’re in construction, fix-and-flips, or a myriad of other businesses which leverage alternative financing options, you’ve probably heard that there are a few 100 LTV hard money lenders in Arizona out there who can help when you need to maximize cash out. In short, LTV references “loan too value” or the amount of money you’re getting in relation to the value of your collateral. In fix-and-flips, that’s usually how much you’re funded in relation to the current appraised value of the home, though sometimes other forms of collateral are used. For example, if you manage to snag a property that’s currently worth $100,000 and your $75,000 bid is accepted and you finance the whole sale, your loan to value is 75%. If, instead, you got caught up in a bidding war and you agreed to pay $100,000 for that property, you’d be looking for 100% loan to value.

The hard reality, however, is that nobody wants to lose money on a deal. You certainly don’t, and the investors who fund your project don’t want to either. If you were approaching a traditional bank for a mortgage, they wouldn’t take risks as well. That’s why they generally require 20% down, making the loan to value 80% if you purchase your home for its appraised value. You can sometimes get away with less, but that’s seen more when the bank has assurance from another source, such as the government, that the costs are getting covered if you default. After all, there are expenses in liquidating a property. The bank will spend time and money getting your home ready and on the market again if you don’t pay, so it’s going to build in a fail-safe; that’s the reason why homebuyers have to provide a hefty down payment.

The same is true of alternative funding. If your investor gives you the full value of your collateral, he or she could wind up holding the bag if you default. That would be a terrible business decision, and investors have wealth because they make smart business decisions, so the concept of getting 100% simply doesn’t make sense.

Buyer Beware: 100% Loans Are Rarely Legit

Some may advertise themselves as 100 LTV hard money lenders in Arizona, but there’s usually a catch. For example, some charge fees to join a group or participate in a funding scheme. Others hit you for a pricy application fee, which can, in some cases, amount to thousands of dollars. You must always do your diligence and find out what the real terms are and where the extra money is coming from because chances are, they are not really going to offer full value in a loan.

Look outside the box or find someone else to lend a helping hand if you’re trying to maximize your loan.

Instead of looking for 100 LTV hard money lenders, see if you can purchase property for less than it’s worth. Great deals still exist. This way, it’s possible to pay for the property and perhaps even the repairs with your funding. You can also seek out a 90% option. Although rare, these are not unicorns—they do exist, and you’ll only need to come up with 10% on your own. Above all else, do your diligence. Work with a reputable company and read your terms to ensure you’re getting the real deal.