What Is Hard Money Loan?
A hard money loan is a short-term loan from a private lender, secured by the property itself rather than the borrower's credit — funded faster than a conventional loan, but at higher interest rates and shorter terms, commonly used for fix-and-flip purchases.
Hard Money Loan in plain English
A hard money loan comes from a private lender and is based mainly on the property's value - often its after-repair value - rather than the borrower's income. Approval can be fast, which helps investors compete.
The trade-off is cost: higher rates, upfront points and short terms, typically months rather than years. Many fund renovation money in draws as work is completed.
Why it matters
Every month a project runs over adds interest and fees, so hard money rewards fast, well-planned projects and punishes delays.
What it means for you
What investors should know
Compare total cost including points, draw fees and extension fees, not just the rate.
Common mistakes
- Not having a clear exit - sale or refinance - before the term ends.
- Underestimating points and fees in the total cost.
- Assuming draws will be released before inspections confirm the work.
Compare and common questions
Hard Money Loan: frequently asked questions
Why do investors use hard money loans?
For speed and flexibility. They can close quickly on properties that conventional lenders will not finance in their current condition.
How long are hard money loans?
Usually short - often about a year or less - with extensions at extra cost.
What do hard money lenders look at?
Mainly the property's value and the plan to repay, plus the borrower's experience and cash in the deal.
Related Terms
Where it fits
- Investing, Financing: before this, DSCR; next, Portfolio Loan.
More Financing Terms
Recommended next step
Include financing costs and months held in your profit estimate.
Fix and flip calculator →Sources and review
No regulator defines this term; the page follows common industry practice.
Where this applies: United States. Private lending terms vary by lender and state.
Last reviewed: · Updated:
Examples use illustrative figures; rules of thumb are labelled as such. Rates, limits and program rules change - confirm current figures with your lender or a qualified professional.
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
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