Hard Money Loans: Complete Guide
Hard money loans are the primary financing tool for house flippers and short-term real estate investors. They are asset-based loans secured by the property itself rather than the borrower's creditworthiness. Understanding how hard money works, what it costs, and when to use it gives you a significant advantage in the competitive world of real estate investing.
How hard money loans work
Hard money lenders evaluate the deal, not the borrower. They care about the property value (specifically the ARV), the borrower's experience, and the exit strategy (how and when you will repay). Loans are short-term (6-18 months) and designed to be repaid when the property is sold (flip) or refinanced (BRRRR).
Typical hard money terms (2026)
| Term | Typical Range | Notes |
|---|---|---|
| Interest rate | 10-14% | Interest-only payments, principal due at maturity |
| Origination points | 1-3 points | Each point = 1% of loan amount, paid at closing |
| Loan-to-value (LTV) | 65-80% of ARV | Some lenders use as-is value instead |
| Loan-to-cost (LTC) | 70-90% | Percentage of purchase + rehab funded |
| Down payment | 10-30% | Of purchase price (rehab often 100% funded) |
| Term length | 6-18 months | Extensions usually available for a fee |
| Closing time | 7-14 days | Much faster than conventional (30-45 days) |
| Prepayment penalty | Usually none | Some lenders have minimum interest periods |
The true cost of hard money
Hard money is expensive compared to conventional financing, but the cost is justified by the speed, flexibility, and access it provides. A typical hard money loan on a $150,000 flip property:
- Loan amount: $120,000 (80% of purchase)
- Points: 2 points = $2,400 (paid at closing)
- Monthly interest: 12% ÷ 12 = 1% = $1,200/month
- 5-month hold: $6,000 in interest
- Total cost: $8,400 on a $30,000-$50,000 profit flip
When to use hard money
- Fix and flip: The primary use case. Short hold, fast close, asset-based underwriting.
- BRRRR: Use hard money for acquisition and rehab, then refinance into permanent financing.
- Bridge financing: When you need to close quickly and plan to refinance within months.
- Auction purchases: Auctions require fast funding that conventional lenders cannot provide.
How to find hard money lenders
- Ask other investors at REI meetups for referrals
- Search "hard money lender [your city]" and compare 3-5 options
- National lenders: Kiavi, Lima One, RCN Capital, Visio Lending
- Local lenders often have better terms and more flexibility
For alternative financing options, see our private money lending guide and investment property financing guide.
Related articles
- Private Money Lending Guide
- How to Finance an Investment Property
- How to Flip Houses
- Fix and Flip Guide
- BRRRR Analysis Guide