Hard money buys speed and flexibility, and charges for both. It exists because banks cannot close in eight days, will not lend on a house with no kitchen, and do not underwrite borrowers who bought four properties last year. Used correctly it is a bridge to permanent financing. Used as permanent financing it is ruinous, and that distinction is the whole of the skill.
What the terms typically look like
Twelve months is the standard term, with six to twenty-four available. Rates commonly run well above conventional — often double digits — plus points charged up front, typically two to four. Payments are usually interest-only, with the principal due at maturity. Leverage is quoted against ARV rather than purchase price on renovation deals, commonly 65–75%, often with a rehab holdback released in inspected draws.
What the lender actually cares about
The asset first: value, condition, exit plan, and the spread between what they lend and what the property is worth. After that, your experience — how many similar projects you have completed — and liquidity to carry the payments and finish the work. Credit matters far less than with a bank, and income documentation is often minimal or absent. This is asset-based lending in its purest residential form.
What it is genuinely good for
Properties no conventional lender will touch — uninhabitable, no kitchen, major systems out. Closings measured in days, which is what wins auctions and distressed deals. Borrowers whose tax returns do not reflect their actual capacity. And bridging the gap while a property is renovated and tenanted before a DSCR refinance takes it out.
The mistake: no exit, or an exit that assumes best case
Hard money is priced for a short hold and becomes punishing over a long one. Every hard money loan needs a specific, dated exit identified before closing — sale, or refinance into a specific product with a specific lender whose requirements you have already checked. The most common failure is discovering at month ten that the takeout lender requires six months of seasoning you have not accumulated, or an appraisal that will not support the payoff. Extensions exist and cost more points.
The takeout
For a rental, the standard exit is a DSCR refinance once the property is renovated, tenanted and seasoned — qualification runs on rent against the payment rather than your income, which suits an investor mid-portfolio-build. Confirm three things before you take the hard money: the seasoning requirement, the LTV the takeout lender will go to, and whether the projected rent produces a DSCR above their floor. The DSCR calculator answers the third in a minute.
Hard Money Loan FAQ
Well above conventional, commonly in the low-to-mid double digits, plus points up front. Pricing varies by lender, market, experience and leverage, so quotes differ widely.
Days rather than weeks — a week to two is typical, and experienced borrowers with a known lender sometimes close faster. Speed is the product.
Usually yes, but it carries far less weight than with a bank. The asset, the exit and your track record matter more.
For the acquisition and renovation, yes — then refinance into a long-term product. Holding a rental on hard money indefinitely will consume the cash flow.
The renovation portion of the loan held by the lender and released in draws as work is inspected and completed. You fund the work first and get reimbursed, so working capital is required.
You request an extension, which typically costs additional points, or you face default and foreclosure. This is why the exit is planned before closing rather than near maturity.