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Essential Hard Money Terms: A Quick Reference or Refresher – Part 6

In the lending world, specifically hard money, numerous terms are used on a daily basis that are outside the vernacular of most. Just like any other profession, once you know the terms you are ready to do business. Fortunately, real estate terms are pretty much common sense and the language can be picked up quickly. This series of posts will introduce some of the most common hard money lending terms, or just provide as a refresh for some of those odd-ball terms from the private lending perspective. See Essential Hard Money Terms Part 5 for more.

Combined Loan-to-Value Ratio (CLTV):

This is the total amount of all debt secured by a borrower’s collateral, including notes in a subordinate position. This means that the CLTV can be higher than the LTV. For example, on a property valued at $100,000, if the hard money loan is a first position loan for $60,000, and there is a second position note for $20,000, then the LTV is 60% and the CLTV is 80%. Acceptable CLTVs vary based on the lender and the situation, but can in some circumstances exceed 100%.

Loan-to-Value Ratio (LTV):

A frequently used term referring to the ratio between the appraised value of a property to the amount of loan requested. This term is often abbreviated as “LTV.” For example, if a property has an appraised value of $1,000,000 and the lender states that they do not make loans over 65% loan to value, the maximum loan amount they will fund on the property is $650,000. Hard money lenders typically require loan to values that are under 65%. Montegra can fund hard money loans up to 75%.

Mezzanine Loan:

This is a loan that is made in a subordinate position to a primary loan (also known as a second or junior lien). This type of financing is generally more expensive than secured debt. Mezzanine debt typically involves the lender taking an interest in the company that owns the property in return for the loan being made at an above average CLTV.

Pre-payment Penalty: 

The penalty fee that the borrower has to pay to the lender if the loan is repaid early. Not all lenders will charge this fee, but if they do, it should be specified in the loan terms.
This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.   has been in the private capital lending business for 41 consecutive years.