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Why Won't a Private Money Lender Finance 100% of My Purchase Price?
- Jacqueline OShaughnessy
- 6 days ago
- 4 min read
By Jacqueline O'Shaughnessy, Loan Officer / Private Capital, NMLS #382900 — South Wind Financial, Inc, NMLS #9462 — Las Vegas, NV
Private Money Explained – Part 1
Who This Guide Is For
You found what looks like the perfect investment property.
The numbers work.
The property has potential.
You're ready to move quickly.
Then the lender says they'll finance only 65% or 70% of the property's value.
Your first thought is probably:
"If this is such a great deal, why won't they lend me the entire purchase price?"
It's one of the most common questions I hear from new real estate investors.
The Problem
Jason found a distressed property listed well below market value.
He was confident it was a great investment and expected a private lender to finance the entire purchase.
Instead, the lender offered financing based on a percentage of the property's value.
Jason was frustrated.
"If you're confident in the property, why do I need to bring money to closing?"
The answer wasn't about doubting Jason.
It was about managing risk.
The Doubts
New investors often ask:
Why do private lenders require a down payment?
What does Loan-to-Value (LTV) mean?
Why won't a lender finance 100%?
Doesn't the property itself secure the loan?
If it's a great investment, why isn't that enough?
These are fair questions, and understanding the answers can help you become a stronger investor.
Understanding Loan-to-Value (LTV)
Loan-to-Value (LTV) is the percentage of a property's value that a lender is willing to finance.
For example:
If a property is worth $500,000 and a lender agrees to finance 70% LTV, the maximum loan amount would generally be $350,000.
The remaining amount typically comes from the borrower's funds or another approved source.
LTV is one of the primary tools lenders use to manage risk.
Why Private Lenders Don't Usually Finance 100%
Private money lenders are investing real capital.
Every loan involves risk.
By limiting the loan amount to a percentage of the property's value, lenders create a financial cushion if market conditions change or the unexpected happens.
That cushion can help protect both the lender and the borrower if a project doesn't go exactly as planned.
An appropriate LTV also shows that the borrower has invested their own money into the project—often referred to as having "skin in the game."
When borrowers contribute their own capital, it demonstrates commitment to the investment and alignment with the lender's interests.
A Good Deal Doesn't Always Mean a Good Loan
One of the biggest misconceptions in private lending is:
A great property automatically makes a great loan.
In reality, lenders evaluate much more than the property itself.
They also consider:
The property's current value
Available equity
The borrower's experience
The condition of the property
The planned exit strategy
Market conditions
How the loan will be repaid
A strong investment opportunity is important, but it's only one piece of the overall picture.
The Solution
Instead of asking,
"How much can I borrow?"
Consider asking,
"How can I structure this deal to make it attractive to a lender?"
Understanding how private lenders evaluate risk can help you build stronger offers, negotiate more effectively, and improve your chances of approval.
Successful investors know that private lending isn't just about borrowing money—it's about creating a loan that makes sense for everyone involved.
Frequently Asked Questions
What is Loan-to-Value (LTV)?
Loan-to-Value (LTV) is the percentage of a property's value that a lender is willing to finance. The remaining amount is typically provided by the borrower or another approved funding source.
Why don't private lenders finance 100%?
Most private lenders limit LTV to help manage risk and provide a financial cushion if property values change or a project encounters unexpected challenges.
Can I borrow more than the lender's standard LTV?
Possibly. Some transactions may involve additional collateral, cross-collateralization, experienced sponsors, or other factors that change the structure of the deal. Every loan is unique.
Does a lower LTV improve my chances?
In many cases, yes. A lower LTV generally reduces the lender's risk and may strengthen your loan request.
Private Money Terms
Loan-to-Value (LTV): The percentage of a property's value that a lender is willing to finance.
Private Money Loan: A loan funded by a private individual or investment group rather than a traditional bank or credit union. Private lenders often focus on the property's value, available equity, and the borrower's exit strategy.
Equity: The difference between a property's market value and the amount owed against it.
Skin in the Game: A common lending term describing the borrower's own financial investment in a transaction.
Key Takeaways
LTV helps private lenders manage investment risk.
Financing less than 100% creates a financial cushion if market conditions change.
Borrowers who invest their own capital demonstrate commitment to the project.
A strong property is important, but lenders also evaluate the exit strategy, equity, and overall loan structure.
Understanding how lenders think can improve your chances of approval.
Private money isn't just about finding someone willing to lend.
It's about structuring a loan that makes sense for everyone involved.
Whether you're purchasing your first investment property or financing your next project, I'd be happy to review your deal, explain how private lenders evaluate opportunities, and help you determine the financing options that best fit your investment goals.
Schedule a complimentary consultation today and let's discuss your next investment.
All my best
Jacqueline O'ShaughnessyLoan Officer/Private Capital
South Wind Financial, Inc
6655 W. Sahara Ave., suite D114
Las Vegas, NV 89148
702-429-3994 cell
702-543-7535 eFax
Company NMLS #9462
Agent # 382900
Agent license #6603
CA-DFP1382900
AZ 1032777
FL L0101736
I don't think I realized PM lenders usually only offer a lower percentage than 100%, but it makes sense. Having "skin in the game" also motivates the borrower to follow through on their loan. Good to know.
Professional and excellent service