Conventional vs Hard Money Lender Example

BANK


ARV 150,000

FMV 100,000

PP 70,000

80% LTV of PP 56,000

Here you’re still required to put 20% down and you might/would lose out on the deal since you didn’t just have 20% lying around


HML

ARV 150,000

FMV 100,000

PP 70,000

75% LTV of ARV 112,500

They lend you the money and then some. You are demonstrating ownership of the deal by paying the HML and thus you can refinance out your property when the time comes. You can/will typically use all of the money the HML gives you to fix up the place, pay for the fees/points associated with refinancing the place. Once that is done however you’ll have a 30k equitable position and you’ll be cash flowing at a much lower interest rate.