Hard Money Loans: What Every Flipper Needs to Know

Hard money loans are short-term, asset-based loans used primarily by real estate investors to purchase and renovate properties. Unlike conventional mortgages, hard money lenders focus on the value of the property rather than the borrower's income or credit score.

Typical hard money loan terms include an interest rate of 9–14% annually, 1–3 origination points (each point equals 1% of the loan amount), a loan-to-value (LTV) ratio of 65–75% of ARV, a term of 6–18 months, and interest-only monthly payments with a balloon payment at maturity.

To qualify, most lenders require a minimum credit score (often 620+), proof of funds for the down payment and reserves, a detailed scope of work for the renovation, a purchase contract, and an ARV analysis with supporting comps. Experience matters — first-time flippers often pay higher rates and receive lower LTV ratios.

When evaluating hard money lenders, compare the total cost of the loan (not just the interest rate), the speed of funding, the draw process for renovation funds, extension policies, and prepayment penalties. A lender who funds quickly and releases draws without excessive red tape can be worth a higher rate.

Build relationships with multiple lenders. Having 2–3 reliable lending partners ensures you can always close on a good deal, even when one lender's pipeline is full.