Privately funded, frequently named "difficult dollars" commercial mortgage loans are mainly equity based loans. They are not credit driven they are underwritten on the basis of the quantity of equity in the collateral property. Loan-to-value ratios (LTV) are significantly more crucial in tough dollars commercial mortgage lending than they are in conventional lending. LTV is just the percentage amount a lender is willing to loan against their perceived value of the target property.
Income Producing Properties
Stabilized, income producing properties such as apartment buildings and workplace buildings are the most sought immediately after commercial real estate property type in the commercial mortgage market. Private commercial mortgage lenders are normally willing to 65-70% LTV if a creating can cover its own mortgage payment.
Vacant or Underperforming Buildings
"Improved" actual estate, or genuine estate with a developing on it, is deemed a great deal more beneficial than raw or unimproved land. Challenging dollars lenders will not lend as significantly against vacant buildings as they will against stabilized buildings but most private commercial mortgage lenders can offer you an LTV of about 60% on this type of asset.
Land
Land is increasingly challenging to finance throughout this "credit crunch". Borrowers will struggle to come across tough income lenders willing to finance any land deals at-all. The ones who nonetheless have an appetite for land loans are writing loans with an LTV of about 50%.
One result of this difficult credit environment that we are facing is that LTV has come down in all areas of lending. Borrowers and sponsors are going to have to come to the table with extra money if they want to secure funding at this time.
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