First Capital Trust Deeds (FCTD) has a minimum loan amount for a hard money second mortgage of $150,000, at a maximum combined loan-to-value (CLTV) in the 60-70% range, depending on the property location and other factors.
The reason $150,000 is the minimum second mortgage loan requirement is that smaller loans take just as much time — if not more — than larger loans. Often we find that borrowers applying for smaller loan amounts have limited experience with hard money and private money loans. Working with an inexperienced borrower can take an outsized amount of time compared to a larger loan for a seasoned investor for whom we’ve closed multiple loans over the years.
FCTD looks at it from the perspective of the 80/20 rule, or Pareto Principle, which states that 80% of your profits come from 20% of your sales. Conversely, the customers that take 80% of your time lead to 20% of profits. Smaller hard money second mortgage loans are less profitable for us as brokers while at the same time, often incredibly time-consuming. Therefore, we require a minimum loan amount of $150,000 for a hard money second mortgage.