Reviewed by the Editorial Team · Updated July 10, 2026 · 6 min read
A hard money loan is short-term, asset-based financing from a private lender, sized on the property's value rather than the borrower's income — fast to close, but often priced in double-digit interest plus points.
Key takeaways
A hard money loan is short-term, asset-based financing from a private lender, sized on the property's value rather than the borrower's income or credit.
Rates often run into double digits plus points, and loan-to-value typically caps around 60-75% of the property's value or after-repair value.
It closes in days rather than weeks, making it a fit for flippers and investors who need to move fast on a deal.
Terms are short, usually 6-24 months and interest-only with a balloon, so losing the property is a real risk if a refinance falls through.
Loan-to-value
Typically 60-75% of value or ARV
Rate range
Often double-digit interest, plus points
Term
6-24 months, interest-only with a balloon
Best for
Flippers and investors who need to close fast
How a hard money loan works
A hard money loan comes from a private lender, not a bank, and is secured by the property itself. Underwriting focuses on the deal — purchase price, repair budget, and after-repair value — rather than your credit or income.
Sized on LTV/ARV: loan amount tied to a share of current or after-repair value
Fast closing: often days instead of the weeks a conventional loan takes
Interest-only: payments cover interest, with principal due at payoff
Short term: typically 6-24 months, ending in a balloon payment
Because the lender is pricing the property, approval can happen with limited documentation and a lower credit score than a bank would accept.
Where hard money gets expensive
Speed and flexibility come at a price. Interest rates commonly run in the double digits, and lenders typically charge points — a percentage of the loan paid upfront — on top of that rate.
THE BALLOON
The loan comes due in full at the end of the term, whether or not the property has sold or refinanced — plan the exit before you close, not after.
Extension fees apply if a flip runs past schedule, so the total cost climbs fast if renovations or the sale take longer than planned.
Who a hard money loan fits
Hard money suits borrowers who need cash quickly and have a clear, short exit plan — not buyers looking for a place to live long-term.
House-flippers financing a purchase and renovation on a tight timeline
Investors who can't wait out a conventional loan's underwriting period
Borrowers with weak credit but strong equity or a strong deal
Anyone with a clear exit: a sale or refinance within the term
Skip it for a primary residence or a long hold — the rate and short term make it a poor fit once speed stops mattering. Most flippers refinance into longer-term financing once renovations are complete and the property is stabilized.
Hard Money Loans: pros and cons
Pros
Closes in days, not weeks
Approval based on the property, not income docs
Works with low or damaged credit
Flexible for renovation and flip projects
Cons
Double-digit interest rates plus points
Short terms with a balloon payment
Lower loan-to-value than a bank loan
Losing the property is a real default risk
Hard money loan vs. DSCR loan
Both are asset-based, but they serve different stages of a deal. A hard money loan is a short-term bridge for buying and renovating a property fast; a DSCR loan is longer-term financing sized on the property's rental income once it's stabilized and ready to hold.
Hard money: fast close, short term, higher cost, exit via sale or refinance
DSCR: 30-year term, pricing closer to conventional investment loans, qualifies off rent
Requirements at a glance
Loan sized on the property's value or after-repair value, not income
Down payment or equity typically 25-40% of value
Rates commonly in the double digits, plus origination points
Term of 6-24 months, interest-only with a balloon payment due
A documented exit plan: sale or refinance before the term ends
Faster closing and lighter documentation than a conventional loan
It's a short-term loan from a private lender, secured by the property's value rather than the borrower's income or credit.
Investors use it to close fast on a purchase — often a flip — with underwriting based on the deal, not a standard income-and-credit file.
What are hard money loan rates?
Rates commonly run in the double digits, well above a conventional mortgage, plus points charged upfront as a percentage of the loan. The exact price depends on the lender, the deal's risk, and how much equity or down payment you bring.
Who uses hard money loans?
Mostly house-flippers and investors who need to close quickly or don't qualify for conventional financing. It suits a short hold with a clear exit — a sale or refinance — rather than a primary residence or a long-term rental buy-and-hold strategy.
How risky are hard money loans?
Hard money loans carry real risk: rates and points run well above conventional financing, terms are short (often 6-24 months), and most are interest-only with a balloon payment due at maturity.
If the exit plan — a sale, refinance, or completed renovation — slips, the borrower can face default and lose the pledged property.
How much down do you need for a hard money loan?
Most hard money lenders finance 60-75% of a property's value or after-repair value, meaning you typically need 25-40% down or equivalent equity. The exact split depends on the property type, the lender's risk appetite, and the borrower's track record with similar projects.
What credit score is needed for a hard money loan?
There's no fixed minimum, since hard money lenders underwrite mainly on the property and the deal rather than the borrower's credit file — many will work with scores well below what a bank requires.
Stronger credit and a clear exit strategy still help you negotiate a lower rate and fewer points.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
No calculator matches that. Try “refinance”, “FHA”, “HELOC” or “amortization”.