Data source & methodology
AuthoritativeDataSource: CFPB Regulation Z (Truth in Lending Act, 12 CFR Part 1026) – finance charge & APR concepts; and common real-estate lending practices for LTV/LTC underwriting caps. See CFPB’s official Regulation Z resources and commentary for consumer-purpose disclosure rules. Regulation Z – 12 CFR 1026.
Tutti i calcoli si basano rigorosamente sulle formule e sui dati forniti da questa fonte.
This tool estimates underwriting caps (min of LTV on ARV vs LTC on cost), points as prepaid finance charges, interest for either interest-only or amortizing repayments, and simple profit/ROI for fix-and-flip scenarios.
The formula explained
\( \text{Loan}_{LTV} = \text{LTV}\_{\%} \times \text{ARV} \)
\( \text{Loan}_{LTC} = \text{LTC}\_{\%} \times (\text{Purchase} + \text{Rehab}) \)
\( \text{Loan} = \min\big(\text{Loan}_{LTV},\ \text{Loan}_{LTC}\big) \)
Points (paid at closing): \( \text{Points\$} = \text{Loan} \times \text{Points}\_{\%} \)
Interest-only payment per month: \( \text{Pmt} = \text{Loan} \times \dfrac{\text{APR}}{12} \)
Amortizing payment: \( \text{Pmt} = P \cdot \dfrac{i(1+i)^n}{(1+i)^n-1} \) where \(i=\frac{\text{APR}}{12}\), \(n=\text{months}\).
Cash to close (simplified):
\( \text{CashClose} = (\text{Purchase}+\text{Rehab}-\text{Loan}) + \text{Points\$} + \text{Origination} + \text{OtherClosing} \)
Total financing cost:
\( \text{FinanceCost} = \text{TotalInterest} + \text{Points\$} + \text{Origination} \)
Profit (flip):
\( \text{Profit} = \text{SalePrice} \times (1-\text{SellCost}\_{\%}) - (\text{Purchase}+\text{Rehab}) - \text{FinanceCost} - \text{Holding} \times n \)
ROI on cash: \( \text{ROI} = \dfrac{\text{Profit}}{\text{CashClose}} \)
Glossary of variables
- Purchase price: Property contract price at acquisition.
- Rehab: Renovation budget to reach ARV.
- ARV: After-repair value—expected market value post-renovation.
- LTV on ARV: Max lender % of ARV they will lend.
- LTC on cost: Max lender % of total project cost (purchase+rehab).
- Points: Prepaid finance charge as % of loan amount.
- Origination/Underwriting: Flat lender fees at closing.
- APR: Annual percentage rate (nominal) used for payment/interest computations.
- Term: Months until balloon/maturity.
- Holding costs: Monthly non-debt carrying costs during the project.
- Selling costs: % of sale price consumed by commissions, taxes, staging, concessions.
How it works: a step-by-step example
Inputs: Purchase $200,000; Rehab $50,000; ARV $350,000; LTV 70%; LTC 85%; Points 2%; Fees $1,500; Other closing $2,500; APR 10%; Term 12 months; Holding $400/mo; Sale $350,000; Selling costs 8%.
- Caps: LoanLTV = 0.70×350,000 = 245,000; LoanLTC = 0.85×(200,000+50,000) = 212,500 → Loan = $212,500.
- Points = 2%×212,500 = $4,250.
- Interest-only payment = 212,500×(0.10/12) ≈ $1,770.83.
- Total interest (12 mo) ≈ 1,770.83×12 = $21,249.96.
- Cash to close = (250,000−212,500)+4,250+1,500+2,500 = $45,750.
- Financing cost = 21,249.96+4,250+1,500 = $26,999.96.
- Profit = 350,000×(1−0.08) − 250,000 − 26,999.96 − (400×12) ≈ $45,000.
- ROI = 45,000 / 45,750 ≈ 98.4%.
Frequently asked questions
What’s better for flips: LTV or LTC?
Lenders typically apply both and lend the lower of the two. LTV protects against over-estimating ARV; LTC ensures the borrower contributes equity to the project cost.
Do points and origination fees change APR?
Yes—points and lender fees are finance charges that raise the effective cost of credit. Consumer-purpose loans must disclose APR per Regulation Z; most business-purpose hard money loans are exempt from TRID but still charge points/fees.
Can my rehab be financed?
Often yes, through draws. This calculator treats the loan amount at face value for simplicity; real draw schedules can reduce average outstanding balance and total interest.
Why might my actual monthly payment differ?
Servicers may compute per-diem interest from actual/365 day count, include escrow, or set minimum interest periods. Confirm your note.
How do I reduce cash to close?
Negotiate lower points/fees, seek a higher LTC, or bring in a partner. Beware that higher leverage increases risk.
Is amortizing common with hard money?
Less common. Interest-only with a balloon is typical to keep payments low; use the amortizing option for comparison or if your lender requires it.
Tool developed by Ugo Candido. Content reviewed by the CalcDomain Editorial Board.
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