First Position Loan Percentage
When lenders provide a loan, they provide a percentage of the Purchase Price and a percentage of the Rehab Cost. Depending on the relationship of the Purchase Price with the Rehab Cost, the exact percentage of the first position loan changes with every deal, and this leads to the following question;
What percentage of the deal is the first position loan?
To calculate, it takes a little bit of math with the following formula;
[(Purchase Price Amount * Percent of Purchase Price) + (Rehab Cost Amount * Percent of Rehab Cost)] / (Purchase Price Amount + Rehab Cost Amount)
If the Purchase Price is $100,000, and the lender is providing 80% ($100,000 * .80); they’re providing $80,000. If the Rehab Cost is $50,000, and the lender is providing 100% ($50,000 * 1.00), they’re providing $50,000. The total being provided is $130,000, which is 86.66% (.8666) of the total project cost ($130,000 / $150,000).
Attached in this post is an Excel spreadsheet with the calculator to help figure the loan percentage out. As a bonus it also calculates the ARV, and the LTC (Loan To Cost). These are two of the different caps lenders will use to limit the amount of the loan. ARV is the After Repair Value; meaning that the loan cannot be above a certain percentage of what the house will be worth when the repairs are completed. LTC is the Loan To Cost value; meaning that the loan cannot be above a certain percentage of the total cost of the deal (Purchase Price + Rehab Cost).