What Is a Hard Money Loan? Rates, Terms, and How It Actually Works

The Short Version

A hard money loan is short-term, asset-based financing secured by real estate rather than by your income or credit profile. Lenders underwrite the property's value and your exit strategy first, your track record second, and your personal financials a distant third. That is why hard money can close in as little as 7–14 days versus 30–60+ for a conventional mortgage.

What "Asset-Based" Actually Means

A bank asks: can you repay this loan based on your income and credit history? A hard money lender asks: does this property — as it sits today, or as it will be after rehab — comfortably secure the loan, and does the borrower have a credible, time-bound plan to pay it off?

That single difference is why hard money exists: it serves deals that are time-sensitive, involve a property that will not appraise as "move-in ready" today, or belong to a borrower whose income does not fit a conventional box (self-employed, foreign national, recently formed entity).

What It Actually Costs

Hard money is priced for speed and risk, not for cheap long-term carry:

Rates: typically 9%–13%, interest-only, though the tightest end of the market for experienced repeat borrowers on strong deals can be lower — see our [fix-and-flip rate update](/insights/fix-flip-bridge-rates-dropped-65bps) for where pricing sits today.

Points/origination fees: 1.5–3.0 points is standard, charged at closing.

Term: most fix-and-flip and bridge hard money loans run 6–18 months, interest-only, with a balloon payment (or refinance) at the end.

Leverage: typically 65–75% of the property's current value, or up to 90% of purchase price plus 100% of rehab costs, capped at roughly 65–70% of After Repair Value (ARV) — see our guide on [how to calculate ARV](/insights/how-to-calculate-arv-fix-and-flip) before you rely on that number.

How Draws Work on a Rehab Loan

You do not receive the full rehab budget at closing. Funds are released in tranches — draws — as work is completed and inspected. Submit an invoice or completed-work photos, the lender (or a third-party inspector) verifies the work, and the draw is released, typically within a few business days. Budget for this timeline; it is the single most common source of underestimated carrying cost on a flip.

What Lenders Actually Look At

The asset — current value, After Repair Value, and whether the rehab scope is realistic for the timeline.

The exit — sell, refinance into a DSCR loan, or hold. A lender wants a believable plan, not a hope.

The borrower's track record — first-time flippers can absolutely qualify, but experience (3+ completed projects) typically unlocks better leverage and pricing.

Liquidity — enough cash to cover a delay: a permitting holdup, a contractor no-show, or a slower-than-planned sale.

Hard Money vs. a DSCR Loan — They Are Not Competitors

Hard money finances the acquisition-and-rehab phase of a deal that is not yet rentable or sellable at a bank's standard. A [DSCR loan](/insights/what-is-a-dscr-loan-explained) finances the property after it is stabilized and producing rent. Most experienced investors use both, in sequence — see our [BRRRR financing guide](/insights/brrrr-method-financing-guide-2026) for exactly how that handoff works.

When Hard Money Is the Right Tool

You are buying at auction or need to close faster than a bank can move.

The property will not qualify for conventional financing in its current condition.

Your business plan has a clear, time-bound exit (sale or refinance) inside 6–18 months.

If your deal fits that shape, [send us the scenario](/apply) — property, purchase price, rehab budget, and timeline. We will tell you what is actually financeable and what it costs, not an advertised teaser rate.