The Quick Read: A flip loan is sized by two tests: a cost-based limit and an after-repair-value ceiling. The lower result becomes your maximum loan. Experience, rehab size, and credit move the cost-based tier, but the ceiling on finished value does not budge.
- Across Lendmire’s network, fix-and-flip leverage runs 85%, 90%, or 93% of project cost, depending on completed projects. Every tier is capped at 75% of after-repair value, and terms vary by lender, property, and experience.
- Up to 100% of the rehab budget funds in draws against completed work. That is a rehab figure, never a purchase LTV.
- No true 100% purchase program exists. “Fully financed” deals still leave a cash gap.
- If the appraisal comes in low, the loan shrinks and your cash need grows.
What Does It Mean to Cap LTV on a Flip?
The lender limits the loan to a percentage of value, but “value” has more than one meaning on a flip. Today’s value, the total project cost, and the finished value each produce a different cap. The smallest result controls.
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.
Scotsman Guide’s hard money tutorial explains why lenders think this way: the decision to lend rests on the subject property. Its illustration pairs an as-is cap of 80% with a lender wanting 65% to 70% once repairs are done. Treat that as one market example. Across Lendmire’s network, fix-and-flip tiers run on project cost and share a 75% after-repair-value cap.
Here is how the three ratios compare.
| Ratio | Measured against | What it limits |
|---|---|---|
| As-is LTV | Today’s value | Purchase-side leverage |
| Loan-to-cost (LTC) | Purchase plus rehab budget | Total money out the door |
| Loan-to-ARV | Projected finished value | Total loan, all in |
Scotsman Guide’s lender directory confirms the mechanics. LTV on a flip involves the projected after-renovation value, and some lenders measure the loan as LTC instead.
Key Terms Defined
As-is value: What the property is worth today, before any work.
After-repair value (ARV): The projected value once the planned renovation is finished, based on comparable sales.
Loan-to-cost (LTC): The loan divided by purchase price plus rehab budget.
Loan-to-ARV (LTARV): The total loan divided by the projected finished value.
Draw: A release of held-back rehab money after the lender confirms completed work.
Holdback: Rehab funds the lender keeps in reserve instead of paying at closing.
Cash gap: What you pay to cover the difference between total cost and the loan, plus closing costs and reserves.
Why Lenders Cap Leverage at All
A flip loan is short and secured by a property that may be half torn apart. If you walk away mid-rehab, the lender owns an unfinished house. If the finished value disappoints, the loan may exceed what a buyer will pay.
A cap on finished value protects against that. The cost-based limit keeps you invested in the project. Your own cash is the cushion that absorbs surprises.
That is why the loan is built around the asset first. Scotsman Guide’s piece on investor loan labels notes that a pure hard money loan is almost exclusively focused on the asset. Credit, experience, and the exit plan still shape the cap, though.
How the Cap Is Applied, Step by Step
1. Two values are established. The lender needs an as-is value and an ARV. The appraiser must know the remodeling plan, because it directly affects the ARV, and the scope of work can be attached to the appraisal report.
2. The cost test runs. The lender applies your tier percentage to purchase price plus rehab budget.
3. The ceiling test runs. The lender applies its ARV cap to the supported finished value.
4. The lower number wins. That number is your maximum loan.
5. Rehab money is held back. Funds are released in draws as work is completed and inspected. Lenders do this so the money cannot be spent elsewhere, leaving them with an unfinished property worth far less than the loan.
6. You fund the gap. That covers the shortfall between total cost and the loan, plus points, closing costs, and reserves.
Worked Example: Which Cap Binds?
These numbers are modeled assumptions, not a market quote. Say you buy at $150,000 with a $50,000 rehab budget. Total project cost is $200,000. The projected ARV is $240,000.
At the 90% tier (two or more completed projects), the cost test gives 90% of project cost. Measured against the $240,000 ARV, that is exactly 75%. Both tests land on the same number.
Now vary the tier:
- 85% tier (fewer than two projects): The loan is about 70.8% of ARV. The cost test binds, and the ceiling never comes into play.
- 93% tier (five or more projects): The cost test would reach about 77.5% of ARV. The 75% ceiling binds and trims the loan.
Now the appraisal comes back at $220,000 instead. At the 90% tier, the cost-based loan would equal about 81.8% of the new ARV. The 75% ceiling now governs. Your loan drops, and the difference lands on your cash.
This is the most common way a quoted leverage figure shrinks. Nothing about you changed. The finished-value number did.
Four Deals, Four Binding Caps
The table models the 90% tier. “Cost” means purchase plus rehab, shown as a share of ARV.
| Deal shape | Cost as % of ARV | Loan as % of ARV | Cap that binds |
|---|---|---|---|
| Wide spread | 70% | 63% | Cost test |
| Typical spread | 80% | 72% | Cost test |
| Thin spread | 88% | 79.2% | 75% ARV ceiling |
| Typical deal, ARV 8% low | About 87% | About 78.3% | 75% ARV ceiling |
The pattern is simple. On the 90% tier, the ceiling takes over once total cost passes about 83% of ARV. On the 85% tier the crossover sits near 88%. On the 93% tier it sits near 81%. Thin deals hit the ceiling first, which is why tight margins rarely get full leverage.
What Moves Your Cap
Experience. Documented completed projects set your cost-based tier. Across Lendmire’s network it runs 85% of project cost with fewer than two projects, 90% at two or more, and 93% at five or more. The top tier is reserved for experienced investors. Experience changes the cost-based leverage, not the 75% ARV ceiling.
Rehab size. A light cosmetic job and a heavy gut rehab are underwritten differently. Scotsman Guide’s piece on lending sameness lists rehab size alongside experience and FICO scores as drivers of the maximums.
Credit. A 620 minimum score applies, with added conditions below 660. First-time investors qualify at the lower leverage tiers. Underwriting stays centered on the property, the plan, and the exit.
ARV quality. The appraised ARV is only as good as the comparable sales behind it. Weak comps mean a lower ceiling.
Property type. Collateral is non-owner-occupied residential, one to four units. Ground-up construction goes to ten units. Everything here varies by lender, property, and experience, and nothing is a commitment to lend.
After Closing: Draws, Budget Changes, and Valuation Fights
The cap does not disappear after the loan funds. It shapes how money moves.
Draws follow completed work. Some lenders pay by line item. Others pay by overall percentage complete. Either way, you usually front the cost of each stage and get reimbursed after inspection. Plan your cash around that rhythm, not just the closing table.
If the budget grows mid-project, the added cost is usually yours. The loan was sized to the original scope, and the ceiling on finished value does not rise because you spent more.
If the lender’s valuation comes in below your estimate, ask what comparable sales drove it. Check whether the appraiser saw your scope of work. Many gaps come from an appraiser who never saw the plan.
Where the General Rule Breaks
- Hard money versus fix-and-flip labels. A true asset-based hard money loan is set by LTV on appraised value. A fix-and-flip program carries more guidelines. Scotsman Guide notes that fix-and-flip loans are commonly sold on the secondary market and go through fuller underwriting. The caps can differ between the two.
- Bridge purchases with no rehab. With no renovation, there is no ARV story. Across Lendmire’s network, leverage runs up to 80% of purchase price.
- Refinances. Cash-out and rate-and-term refinances run up to 65% of value, well below flip leverage.
- Ground-up construction. Leverage runs up to 90% of cost and 75% of completed value at three or more completed projects. Experience matters more here.
- “100% financing” claims. No true 100% purchase program exists. The honest reading is up to 100% of the rehab budget in draws, with the purchase portion financed at a tiered percentage of cost and everything under the ceiling.
- Gap or second-lien money. The first-lien lender must permit it, and many do not.
- Owner-occupant rehab products. Renovation loans built for homebuyers do not apply to investor flips.
The Investor Decision: What the Cap Means for Your Cash
The ARV ceiling, not the advertised cost-based tier, often sets how much cash you bring. Run both tests on every deal before you make an offer. Flipping is cash-intensive, and a 90% headline is not a 90% loan on every deal.
A common purchase screen is ARV times 70%, minus rehab costs. That is a screen for what to pay, not a cap on what a lender will lend. Treat it as a rule of thumb.
Think about the exit before you close. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized. DSCR means debt service coverage ratio: the property’s rent compared with its payment. That refinance is sized against appraised value, so an ARV that falls short can leave a bridge loan you cannot pay off. Lendmire’s complete DSCR loans guide covers that long-term side.
The short-term terms are 6 to 18 months, interest-only, with no prepayment penalty. Loan amounts run up to $5,000,000, with larger by exception. Lendmire is a broker, and it arranges these loans through select lenders in its network across 41 markets, including Washington, D.C.
Tax treatment varies; consult a qualified professional.
Mistakes to Avoid
- Treating cost-based and value-based percentages as the same thing. Always ask which base a quote uses.
- Using an inflated ARV. The lender’s number wins, not yours.
- Forgetting the cap covers purchase and rehab together.
- Assuming draws arrive at closing.
- Buying at the edge of your tier and then watching the appraisal drop.
For the front end of the process, see Lendmire’s piece Can an Investor Find a Hard Money Lender for a Fix and Flip?.
Frequently Asked Questions
Does 90% leverage mean I only need 10% down?
Not necessarily. The 90% applies to project cost at the two-or-more-projects tier. The loan also cannot exceed 75% of ARV, so a thin spread or a low appraisal can cut the loan below the cost-based number and raise your cash need. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Is hard money LTV measured on today’s value or finished value?
On a flip, it is usually tied to the finished value, the ARV. Lenders still look at as-is value for the purchase side. Always ask which value and which ratio a quote uses.
Why does a higher experience tier not raise the ARV cap?
The ceiling protects the lender against a finished property that sells for less than expected. That risk exists no matter who the borrower is. Experience affects the cost-based tier because a proven operator is less likely to run into trouble mid-rehab.
Do first-time flippers qualify?
Often yes, at the lower leverage tier of 85% of project cost, subject to lender guidelines. Credit needs to be at least 620, with added conditions below 660. The property, the plan, and the exit still drive the decision.
What happens if the appraisal comes in under my projected ARV?
The maximum loan falls with it, since the cap is a percentage of the lower value. You make up the difference in cash, or renegotiate the deal. Scope-of-work details and strong comps help prevent a surprise.
Next Step
If you are buying, rehabbing, or refinancing an investment property 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.
For how the sizing plays out on a real file, Lendmire’s piece How Much a Hard Money Lender Will Lend on a Fix-and-Flip walks through the leverage side in more detail.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage brokerage specializing in DSCR investor loans, helping arrange financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. The model centers on property-level rental income reviewed by the lender rather than W-2 documentation, subject to lender guidelines, suiting entity-owned and multi-property investors. Lendmire holds Scotsman Guide Top Mortgage Workplace recognition for 2025 and 2026.
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References
1. Scotsman Guide: Take a Tutorial on Hard Money Loans
2. Scotsman Guide: Fix and Flip Loans
3. Scotsman Guide: Stop the Confusion for Investor Clients
4. Scotsman Guide: Don’t Drown in the Sea of Lending Sameness
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 a Hard Money Lender Sizes a Flip Without Income Documents · How a Hard Money Lender Sizes an Interest-Only Fix and Flip Loan · How a Hard Money Lender Limits Fix and Flip Property Types
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.