Private Money Nevada
Understanding Loan Terms and Structures in Private Lending
Loan-to-Value (LTV) Ratios
Loan-to-value ratios determine how much a lender is willing to finance based on a property’s value. In hard money lending and private money lending, LTV ratios are typically conservative, ranging from 50 to 70 percent of the property’s current or after-repair value. Lower LTV ratios reduce risk for the lender and often translate into better rates for the borrower. For instance, an investor with a 50 percent equity stake might secure a lower interest rate than someone borrowing at 70 percent LTV because the lender’s exposure is smaller.
Interest‑Only vs. Amortizing Payments
Interest-only loans require monthly payments that cover only the interest, leaving the principal balance unchanged until maturity. This structure keeps cash flow manageable during renovations or property stabilization. Amortizing payments, which include both principal and interest, may be offered for longer-term private loans. While amortizing payments can be slightly higher each month, they reduce the principal over time, potentially lowering the balance owed when you refinance or sell.
Balloon and Maturity Dates
A balloon payment refers to the lump sum of principal due at the end of a loan term. Balloon loans work well when you know the property will be sold or refinanced shortly after the loan term ends. For example, a 12-month interest-only loan with a balloon at the end suits a fix‑and‑flip project. You pay interest monthly, then repay the principal when the house sells. If market conditions change or the property takes longer to sell, you may need an extension or a new loan—so plan ahead.
Interest Reserve Funds
Some private lenders require borrowers to fund an interest reserve—a portion of the loan set aside to cover interest payments for several months. The lender holds this reserve and uses it to make interest payments on the borrower’s behalf. This ensures the loan remains current even if the borrower’s cash flow fluctuates, particularly useful in major renovations or new construction when income isn’t yet generated.
Customized Structures
Private lending’s biggest advantage is flexibility. Terms can be tailored to the borrower’s needs. For instance, a lender might offer a sliding interest rate that decreases as renovation milestones are met or base part of the fee on the property’s sale price. Some lenders accept cross-collateral, using multiple properties as security. Others allow interest to accrue without monthly payments, with all interest paid at closing. When negotiating your loan, explain your project’s timeline and cash flow to find the structure that best aligns with your goals.
Want to Tailor Your Loan?
If you’re overwhelmed by the different loan structures and want guidance on choosing the right terms, Private Money Nevada can help. We’ll walk you through LTV ratios, payment schedules and options to customize your loan to your specific project. Contact us to discuss how we can structure financing that fits your needs.
Contact Private Money Nevada Today:
Phone: (702) 205-7070
Email: info@privatemoneynevada.com
Las Vegas Office: 6230 McLeod Dr. Suite 120, Las Vegas, Nevada 89120
Licensed Nevada Mortgage Lender | NMLS #123456
Find trusted private money lenders offering fast approvals, competitive rates, and quick funding for Nevada investment properties, fix and flip projects, and commercial real estate throughout Las Vegas, Reno, and Henderson.
PRIVATE MONEY NEVADA
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