The Quick Read: Lenders cap a flip loan at a share of purchase price plus rehab budget, but that cost-based share never works alone, because the loan must also fit under a cap tied to after-repair value, so the lower result sets the loan and decides how much cash you bring. Every figure below varies by lender, property, and experience, and nothing here is a commitment to lend.
- Across the wholesale network Lendmire places files with, fix-and-flip leverage is tiered by completed projects: 85% of project cost with fewer than 2, 90% at 2 or more, and 93% at 5 or more.
- Every tier is capped at 75% of after-repair value (ARV), so on thin-margin deals the ARV cap, not the cost percentage, sets the loan.
- Up to 100% of the rehab budget funds in draws against completed work. That is a rehab-budget figure, never a purchase LTV.
- No true 100% purchase program exists. The top tier is reserved for experienced investors.
- Terms run 6 to 18 months, interest-only, with loans up to $5,000,000 and larger by exception.
What Loan-to-Cost Actually Measures
Loan-to-cost is the loan amount divided by total project cost, and for a flip, project cost means the purchase price plus the rehab budget.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Loan-to-value works differently. It measures the loan against an appraised value instead of what you spent. On a flip, lenders look at three ratios at once.
| Ratio | Measured against | Where it matters on a flip |
|---|---|---|
| Loan-to-cost | Purchase price plus rehab budget | Sizes the loan on well-bought deals |
| Loan-to-ARV | Value after renovation | Caps the loan on thin-margin deals |
| Loan-to-value | Current as-is value | Limits purchase-only or refinance loans |
The cost ratio gets the headlines. The ARV ratio often does the real limiting.
How Underwriting Sizes the Loan, Step by Step
Underwriting runs two tests on every flip and funds the lower result. Here is the sequence a lender follows, from gathering the inputs through both tests to the final sizing.
1. Gather the inputs. The file needs the purchase price, the rehab budget, the as-is value, and the ARV. Recent sold comparables support both value figures.
2. Compute the cost ceiling. Multiply total project cost by the tier percentage your experience earns.
3. Compute the ARV ceiling. Multiply the ARV by the lender’s ARV cap. In the network’s fix-and-flip program, that cap is 75% of ARV on every tier.
4. Take the lower number. The smaller ceiling is the maximum loan. If cost approaches the ARV limit, the lender trims the loan and you cover the difference.
5. Split the loan into two buckets. The acquisition portion funds at closing. The rehab portion sits in a holdback and is released in draws.
6. Add up your cash. You owe the gap between cost and loan, plus closing costs, lender charges, and any reserves the lender wants to see.
The ARV cap binds when the spread between all-in cost and ARV is slim. The cost percentage binds when you bought well. Most of the surprises in this product come from not knowing which test is controlling your deal.
The Leverage Tiers: Why Experience Sets the Number
Lenders tier leverage by documented completed projects, because experienced operators finish on budget more often. The network’s fix-and-flip program reflects that logic.
| Completed projects | Maximum loan-to-cost | ARV cap |
|---|---|---|
| Fewer than 2 | 85% of project cost | 75% of ARV |
| 2 or more | 90% of project cost | 75% of ARV |
| 5 or more | 93% of project cost | 75% of ARV |
Credit still matters, though underwriting stays centered on the property, the plan, and the exit. A 620 score is the minimum, with additional conditions below 660. First-time investors qualify at the lower leverage tiers. Terms, tiers, and eligibility vary by lender, property, and experience.
Other structures in the same family use different bases.
- Bridge purchases without rehab: up to 80% of purchase price.
- Cash-out and rate-and-term refinances: up to 65% of value.
- Ground-up construction: up to 90% of project cost and 75% of completed value at 3 or more completed projects.
- Collateral: non-owner-occupied residential property of 1-4 units, with ground-up construction up to 10 units.
Worked Example: One Deal, Three Outcomes
Here is how the two tests interact. The table uses percentages instead of dollars, so you can map it onto any deal. It assumes a borrower in the 90% tier and sets ARV at 100.
| Item | Well-bought | Overpaid | Thin margin |
|---|---|---|---|
| All-in cost as % of ARV | 70% | 85% | 95% |
| Cost-based loan (90% of cost) | 63% of ARV | 76.5% of ARV | 85.5% of ARV |
| ARV cap | 75% of ARV | 75% of ARV | 75% of ARV |
| Loan funded (the lower one) | 63% of ARV | 75% of ARV | 75% of ARV |
| Limit that binds | Cost | ARV | ARV |
| Your cash, % of ARV | 7% | 10% | 20% |
| Your cash, % of cost | 10% | About 11.8% | About 21.1% |
Closing costs, lender charges, and reserves come on top of every cash figure in the table.
The first deal behaves exactly as the headline suggests: a 10% contribution. The second gives up a little more. The third needs double the ARV-based cash of the second, even though the stated leverage never changed.
The Break-Even Point
The cost percentage stops being the limiting factor when all-in cost crosses the ARV cap divided by your tier percentage. With a 75% ARV cap, these thresholds apply.
- 85% tier: cost above about 88% of ARV.
- 90% tier: cost above about 83% of ARV.
- 93% tier: cost above about 81% of ARV.
Higher tiers hit the ARV wall sooner. A 93% loan-to-cost is only fully usable on a deal bought at roughly four-fifths of ARV or better. This is why experience improves the headline number without removing the need for a good purchase price.
How This Relates to the Rule
The 70% rule is a buyer’s offer formula: ARV times 70%, minus repairs. It is not a lender requirement. RealEstateSkills’ fix-and-flip formula calls it a starting point, notes that cheaper, slower-selling houses may need a lower percentage, and warns against subtracting holding costs a second time, since the 30% margin already covers them.
A deal bought under the 70% rule lands in the first column of the table above. It clears the ARV cap with room to spare.
What Counts as Cost
Cost means the purchase price and the rehab budget. Closing costs, lender charges, and reserves are usually your cash, outside the loan, though treatment varies by lender. Holding costs during the project generally come from your own funds as well. Lendmire’s piece Hard Money Holding Cost Documentation for a Fix-and-Flip Budget covers that side in detail.
Two details matter in practice. First, a rehab contingency only counts if the lender accepts it in the approved budget. Second, an assignment fee on a wholesale deal is usually part of the contract price, so it sits inside cost and inside your ARV math. Ask which items a lender includes before you build your offer on a cost figure.
How Rehab Money Is Released
The loan percentage is not the cash you receive at closing. Closing funds cover acquisition. Rehab money sits in a holdback and is released in draws, usually after an inspection confirms the work is done.
That makes draws a reimbursement. You typically pay the contractor first, then request a draw against a pre-agreed schedule. Up to 100% of the rehab budget can fund this way in the network’s fix-and-flip program, which is why that number never belongs next to a purchase LTV. Lenders also want proof that you hold the reserves to start the work.
ARV drives the cap, so how it is set matters. RealEstateSkills’ guide to ARV defines it as a comparables-based estimate of value after renovation. An optimistic ARV is a common reason a loan shrinks after you are under contract.
Where the General Rule Breaks
The tier table is the rule. These are the places it bends.
- Structure variants. Some lenders size on a percentage of ARV with no minimum down. Others fund a percentage of purchase price plus a percentage of rehab, subject to the ARV cap. The two methods can produce different loan amounts on the same deal.
- Deep-discount purchases. A purchase far below value can support a loan above the purchase price, because the lender is sizing on the whole project cost against a generous ARV spread.
- Scope changes. Repairs discovered after the scope of work is submitted may not be credited at inspection, which can leave the next draw short.
- Hundred-percent claims. In the network’s program, 100% refers to the rehab budget, not to purchase. The loan still has to fit the ARV cap.
- Refinances and ground-up work. These use different bases, 65% of value on a refinance and 90% of cost on ground-up at the top experience tier, so the table above does not carry over.
- Property type. Eligibility depends on the property, not just the ratios. Lendmire’s article How a Hard Money Lender Limits Fix and Flip Property Types explains which properties fit.
What to Do When the ARV Cap Binds
When the ARV cap controls, you have five practical levers. Use them before you go hard on the contract, not after.
1. Renegotiate the price. Every dollar of price reduction flows straight to the equity gap.
2. Trim the scope. Cutting low-return items lowers cost and can pull the deal back under the cost ceiling.
3. Bring more cash. This is the direct fix, but it lowers your return on cash.
4. Bring in a partner. Equity from a partner can fill the gap if the deal still earns an acceptable return.
5. Walk away. A flip that only works at 100% of your hoped-for ARV is a signal, not a setback.
Thin margins punish you twice: once in cash required, and again in the lower margin left at sale. If the ARV cap is binding by a wide margin, the problem is usually the purchase price, not the loan program.
Mistakes and Red Flags
Most trouble comes from a handful of misreadings.
- Reading 90% as a 10% down payment. Ten percent is only the minimum. The ARV cap, closing costs, lender charges, and reserves can add to it.
- Assuming rehab money arrives upfront. It is reimbursement, so liquidity matters as much as headline leverage.
- Treating the 70% rule as an underwriting rule. It is a deal screen.
- Underbudgeting. Cost overruns raise your share of the project because the lender does not fund them automatically. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Lenders set their own caps, which is why they differ so widely. Tax treatment varies by how the property is held and sold; consult a qualified professional before relying on any deduction.
The Pre-Offer Check, and the Exit After the Flip
Run this check before you make an offer.
1. Estimate ARV from recent sold comparables, then shade it conservatively.
2. Add purchase price and a rehab budget with a realistic contingency.
3. Divide all-in cost by ARV. Compare the result to your tier’s break-even point.
4. Run both ceilings and take the lower one.
5. Add closing costs, lender charges, and reserves to your cash figure.
6. Confirm you can float early rehab costs until the first draw is reimbursed.
7. Decide your exit: sale, or a hold.
The hold exit matters more than most flippers plan for. A flip that does not sell on schedule can move into a rental. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. DSCR compares rent to the full monthly housing payment and nothing else, so clearing 1.00 does not mean positive cash flow after repairs, vacancy, and management. Select programs start at 1.00, and a separate select-lender path goes below it with leverage and terms adjusted. For the full picture, see the complete DSCR loans guide.
Key Terms Defined
Loan-to-cost (LTC): the loan amount divided by purchase price plus rehab budget.
After-repair value (ARV): the estimated market value of the property once renovations are finished.
ARV cap: the maximum loan, expressed as a percentage of ARV, regardless of what the cost-based percentage would allow.
Holdback: the portion of the loan reserved for rehab and released in draws instead of at closing.
Draw: a release of holdback funds after the lender confirms work was completed.
Skin in the game: the cash a borrower puts into a project, which lenders want to see.
Frequently Asked Questions
Does the lower of the two limits really set the loan?
Yes. A lender calculates the cost ceiling and the ARV ceiling, then funds the smaller. If cost is high relative to ARV, the ARV cap wins and you cover the difference. The tier percentage is the most you can receive, not what you are owed.
What does 100% financing mean on a flip?
It does not mean the lender funds the whole purchase. In the network’s program, the 100% figure applies only to the rehab budget, released in draws against completed work. No true 100% purchase program exists, and every loan still has to fit the ARV cap, so deals with thin margins rarely clear it.
How much cash do I need to bring?
It depends on which ceiling binds. On a well-bought deal at the 90% tier, your contribution to the project is roughly 10% of cost. On a thin-margin deal it can double. Add closing costs, lender charges, and reserves, since those typically sit outside the loan.
Is this loan-to-cost or loan-to-value?
Both apply. Loan-to-cost sizes the loan from what you spend. Loan-to-ARV caps it from what the finished property is worth. Purchase-only and refinance loans use value-based limits rather than cost-based tiers. On a refinance, the cap is up to 65% of value.
Do experience and credit change the limit?
Yes. Leverage steps up from 85% to 90% to 93% of project cost as you document more completed projects. A 620 score is the minimum, with extra conditions below 660. First-time investors qualify at the lower tiers. All terms vary by lender, property, and experience.
Running Your Own Numbers
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire arranges these loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. The site calculator offers an editable, illustrative estimate to test your cost and ARV inputs. Call 828-256-2183 to talk through a deal.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines, which can make them a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. RealEstateSkills: Fix and Flip Formula
2. RealEstateSkills: After-Repair Value
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Replace Seller Financing With a Hard Money Loan on a First Flip · How a Hard Money Lender Sizes an Interest-Only Fix and Flip Loan · Hard Money Application Fee Rules for a Fix-and-Flip Purchase
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.