The Quick Read: A hard money lender takes the appraised value, applies a leverage cap to it, runs a second test against project cost, and funds the lower of the two results. The appraisal sets the value side of the file, and the cost side comes from the purchase price and rehab budget. Whichever test produces the smaller loan wins.
- Fix-and-flip loans are sized on project cost, then capped at 75% of after-repair value (ARV).
- Bridge purchases without rehab run up to 80% of purchase price, and refinances up to 65% of value.
- Rehab money funds in draws against completed work, not at closing.
- A low appraisal shrinks the loan, and the borrower covers the gap with cash or a new price.
- Every figure varies by lender, property, and experience, and nothing here is a commitment to lend.
Most investors think the lender is pricing the deal. The lender is really sizing a collateral position. The appraisal tells the lender what the property is worth today, what it should be worth after the work, or both. Then the lender decides how much of that value it will lend against.
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.
Lendmire is a mortgage broker that arranges hard money and DSCR investor loans through select lenders in its wholesale network, across 41 markets, including Washington, D.C. What follows is how the sizing mechanics work inside those files.
Key Terms Defined
Appraised value: The appraiser’s opinion of what the property is worth under a stated set of conditions.
As-is value: The value in current physical condition, use, and zoning on the appraisal’s effective date.
After-repair value (ARV): The value after the planned renovation is finished, based on sold comps in renovated condition.
Loan-to-value (LTV): The loan divided by the appraised value.
Loan-to-cost (LTC): The loan divided by purchase price plus rehab costs. BiggerPockets separates the two terms the same way.
Subject-to appraisal: An appraisal that assumes the work is complete as described in the scope of work.
Broker price opinion (BPO): A lighter, cheaper value estimate that some lenders accept in place of a full appraisal.
What the Appraisal Does in a Hard Money File
The appraisal is the collateral check. Hard money is asset-based, so the lender cares about the property, the plan, and the exit. It does not size the loan on borrower income. The appraised value tells the lender how much room it has if the project stalls and the property has to be sold.
The “V” in LTV is not the same on every loan. A bank typically uses the lower of purchase price or an as-is appraisal. A hard money lender on a rehab deal typically uses a subject-to appraisal, meaning value after renovation. That difference explains why the same house can support very different loan amounts depending on who is lending.
The formal definitions come from bank regulators. The Interagency Appraisal and Evaluation Guidelines define as-is value as value in current condition, use, and zoning on the effective date. They also describe prospective values “as completed” and “as stabilized” for projects under construction or renovation. That guidance binds banks, not private lenders. It is still the clearest published vocabulary for what the appraiser is doing.
Which Value Sizes Which Loan?
The deal type decides the value. A fix-and-flip anchors on ARV. A refinance has nothing to finance beyond the current property, so as-is value is all there is.
| Deal type | Value that governs | Program ceiling in the network |
|---|---|---|
| Bridge purchase, no rehab | Purchase price / as-is | Up to 80% of purchase price |
| Cash-out or rate/term refinance | As-is value | Up to 65% of value |
| Fix-and-flip | Project cost, capped by ARV | 85% to 93% of project cost, max 75% of ARV |
| Ground-up construction | Cost, capped by completed value | Up to 90% of cost, 75% of completed value |
Think of it as a floor and a ceiling. As-is value shows what the lender could recover on day one. ARV shows what the project is supposed to be worth when it is done. The lender wants the loan to sit comfortably inside both.
These are ceilings, not promises. Where a file lands depends on the lender, the property, and the borrower’s experience.
The Sizing Sequence, Step by Step
Here is how the appraisal moves through a file from order to funding.
1. The valuation is ordered. Most files use a full appraisal. Some lenders accept a BPO on lighter deals. On a rehab, the report typically states an as-is value and an ARV, with the ARV resting on a hypothetical condition that the work is finished.
2. The appraiser builds ARV from sold, renovated comps. The appraiser looks for nearby sales in the condition the property will have after the work, adjusts each one for differences, and arrives at a value. ARV is not purchase price plus rehab spend. It is what renovated homes around the subject have actually sold for. A report with a hypothetical condition has to tie that assumption to the value it affects, a point the Appraisal Institute’s guide notes make directly.
3. The lender checks the scope. The rehab budget and scope of work have to support the ARV. If the appraiser assumes a full kitchen and two baths and the budget covers paint and flooring, the numbers do not agree.
4. The cost test runs. On a fix-and-flip, the network’s leverage tiers are tied to documented experience: 93% of project cost at 5 or more completed projects, 90% at 2 or more, and 85% with fewer than 2. The top tier is for experienced investors. Up to 100% of the rehab budget funds in draws against completed work. That is a rehab-budget figure, not a purchase LTV.
5. The value test runs. Every flip tier is capped at 75% of ARV. This is where the appraisal does its work.
6. The lower number wins. The lender compares the cost-based amount to the ARV-based amount and funds the smaller one.
7. The loan is set, then drawn. The loan size is fixed at origination. The purchase portion funds at closing. The rehab portion releases in draws as work is completed.
Worked Examples (Percentages and Ratios Only)
These are modeled assumptions, not market data. Each uses placeholders so the logic is visible without a payment or proceeds figure.
Example one: the cost test binds. A flipper with 5 or more completed projects buys a light-rehab house. Project cost is modest compared with ARV. At 93% of project cost, the loan comes in well under 75% of ARV. The cost test produces the smaller loan, so cost governs. The appraisal confirmed there was room, but it did not set the number.
Example two: the ARV cap binds. Take an experienced flipper on a heavy rehab where purchase price plus rehab is close to the appraised ARV. Ninety-three percent of that project cost lands above 75% of ARV. The ARV cap overrides the cost test. This is the leverage haircut. The tier looked high on paper, and the appraisal pulled it down.
Example three: the appraisal comes in under contract. On a bridge purchase at up to 80% of purchase price, the lender still looks at the appraised value. If the as-is value comes in below the contract price, the lender does not stretch to the contract price. The loan shrinks to fit the value, and the borrower covers the difference.
The pattern across all three: the appraisal never raises a loan above the cost-based amount. It can only hold the loan where it is or cut it.
LTV, LTC, and Loan-to-ARV Compared
Investors mix these terms up, and quoted percentages get misread.
| Measure | Denominator | Where it shows up |
|---|---|---|
| LTV | Appraised value (as-is) | Bridge and refinance |
| LTC | Purchase price plus rehab | Fix-and-flip leverage tiers |
| Loan-to-ARV | After-repair value | The cap on every flip tier |
One BiggerPockets reply notes that in some areas “LTV” means as-is value and ARV means after-repair value, which is why a quoted percentage always needs a label. Ask whether a number is measured on cost, as-is value, or ARV before comparing offers.
How ARV Gets Built, and Why Your Number Does Not Count
Lenders do not size on a borrower’s ARV. They size on the appraiser’s. The comp screen that appraisers and lenders commonly apply favors sold, renovated comps within about a half mile, closed recently, close in square footage, and matching in bed and bath count. ARVCalc, a calculator vendor, reports that strong comps tend to land within 3% to 5% of the eventual appraisal, while weak comps can miss by 10% to 20% or more. Treat that as a rule of thumb, not a statistic.
Three things inflate ARV in practice:
- A wholesaler’s number taken at face value.
- A real estate agent’s CMA, which is not an appraisal.
- Newly built comps used to support a rehab value.
A renovated house is typically rated C2 on the appraiser’s condition scale. If nearby sales support nothing more, the rehab will appraise only slightly above unrenovated comps, however good the finishes are.
When the Appraisal Comes In Low
A low value shrinks the loan. The borrower then has four options: bring more cash, renegotiate the purchase price, challenge the value, or walk.
Challenges are narrower than most investors expect. Some lenders weigh outside appraisals heavily and others less. Rebuttal comps are sometimes reviewed, but you should assume you get one shot at it, so the evidence has to be right the first time. Rebuttal comps that are newly built rarely help on a rehab.
The cause is often location or thin comps. A property on a busy street, a double lot with two buildings, or a house with few recent renovated sales all make ARV the most contested number in the file. On those, a low appraisal is a real possibility and the borrower’s equity cushion needs to reflect it.
Also check who pays the valuation fee if the deal dies. It is usually the borrower.
Edge Cases Where the General Rule Bends
Residential versus larger multifamily. Residential rehab appraisals mostly use a hypothetical “as complete” value. Dart Appraisal notes that commercial appraisals more often use a prospective “upon completion” value. Agency material, such as Freddie Mac’s multifamily guidance, says hypothetical conditions must be disclosed. That is a brief contrast. It does not govern hard money files. The network’s hard money collateral is non-owner-occupied residential, 1 to 4 units, with ground-up construction up to 10 units.
Thin comps. When comps are scarce, lenders may haircut ARV internally for execution risk, even if the report supports a higher number.
Light versus heavy rehab. Light rehabs often size on cost with the ARV cap well out of reach. Heavy rehabs are where the cap bites.
Refinance and exit appraisals. The next lender’s appraisal, including a DSCR refinance, follows the same logic. Your own ARV never sizes the take-out loan. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The appraisal on that refinance also supports market rent through the 1007 rent schedule for single-family or the 1025 operating income statement for 2 to 4 units. Hard money does not need a rent schedule to size the loan. Those form names are Fannie Mae appraisal forms that DSCR files borrow. They are not DSCR rules. For a deeper look at the investment property side of sizing, see Lendmire’s piece Hard Money ARV Appraisal vs Lender Value for an Experienced Flipper, and the complete DSCR loans guide for the long-term exit.
What Else the Appraisal Drives
Beyond loan size, the report shapes the draw schedule and the completion check. Lenders typically release rehab funds as work is verified, and a completion inspection or exit appraisal feeds the value used at refinance.
Loan size, terms, and minimums also sit in the background. Network loan amounts run up to $5,000,000, with larger by exception, and smaller balances vary by lender. Terms run 6 to 18 months, interest-only, with no prepayment penalty.
Credit is a separate gate. A 620 minimum score applies, with additional conditions below 660, and first-time investors qualify at the lower leverage tiers. Underwriting stays asset-based, meaning property, plan, and exit.
Pre-Appraisal Checklist
- Pull your own sold, renovated comps and stress-test your ARV against them.
- Write a scope of work and budget that match the finish level your comps assume.
- Confirm whether each quoted percentage is measured on cost, as-is value, or ARV.
- Know which tier your completed-project count puts you in.
- Plan for a lower number. Decide in advance how much extra cash you can bring.
- Confirm access to the property and any permits for the appraiser.
Frequently Asked Questions
Does the lender order the appraisal, or do I?
Usually the lender or its management company orders it, so the report is independent. Some lenders accept a BPO on lighter files. Ask the lender who orders and who pays before you commit.
Which value does the lender use, as-is or ARV?
It depends on the deal. Bridge purchases and refinances use as-is value, since no rehab is financed. Fix-and-flips size on cost and cap at 75% of ARV. Ground-up construction caps at 75% of completed value.
Can I use my own ARV?
No. The lender relies on the appraiser’s ARV, and a deal built on an inflated number shrinks when the report comes back. Build your number from sold, renovated comps so it matches what the appraiser will find.
What happens if the appraisal comes in low?
The loan amount drops, and the borrower covers the gap with cash, renegotiates the price, or walks. Some lenders review rebuttal comps, but adjustments are not common and you should assume one attempt. Newly built comps generally do not help on a rehab dispute.
Is there a 100% purchase program?
No. The highest flip tier is 93% of project cost for investors with 5 or more completed projects, and it is still capped at 75% of ARV. Up to 100% of the rehab budget funds in draws against completed work, which is a different measure than purchase leverage.
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. Reach the team at 828-256-2183 or request a quote. Tax treatment varies; consult a qualified professional.
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 — 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. BiggerPockets – 10 Terms for Hard Money
2. Federal Reserve – Interagency Appraisal and Evaluation Guidelines
3. appraisalinstitute.org: Guide Notes
4. ARVCalc – After Repair Value Guide
5. Dart Appraisal – Value Scenarios
6. Freddie Mac MF – Nonstabilized Property Appraisal Guidance
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Is There a Limit on a Hard Money Fix-and-Flip Loan? · Does a Hard Money Lender Cap Loan to Cost on a Flip? · Hard Money After Repair Value Loan Requirements for a Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.