Understanding Hard Money & Private Lending
Hard money is asset-first lending from private capital. The property secures it, the equity cushion protects the lender, and the underwriting is fast because there is very little to underwrite beyond the collateral and the exit. You pay for that speed — and in the right situation the speed is worth several times the cost.
Hard Money Loans terms at a glance
Hard Money Loans — typical parameters
Illustrative market ranges. Your actual terms depend on lender underwriting, credit, collateral and program availability.
| Loan amount | $100,000 – $20,000,000 |
|---|---|
| Speed to funding | 3 – 10 days (72 hrs possible) |
| Interest rate | 9% – 15% |
| Points | 1 – 4 |
| Loan-to-value | Up to 75% (65%–70% typical) |
| Term | 3 – 36 months |
| Payments | Interest-only, balloon at maturity |
| Minimum credit score | 600 (flexible) |
| Underwriting basis | Property equity and exit plan |
| Property types | Residential investment, commercial, land, mixed-use |
How Hard Money Loans can help you
Hard money answers a narrow question extremely well: can this close before the window shuts? Every other consideration is secondary, which is exactly why the product exists.
You can close in days rather than weeks
Foreclosure auctions, courthouse steps, estate sales and 1031 deadlines do not extend themselves. A private lender with discretionary capital can commit in 24 hours and fund in 72. When the alternative is losing a deal with $200,000 of equity in it, paying three points is arithmetic, not extravagance.
Your credit or tax returns are not the issue
Hard money underwrites the asset. Recent bankruptcy, a tax lien, a foreclosure two years ago, no verifiable income — none of these are automatic disqualifiers if the equity position and the exit are sound. For borrowers rebuilding, it is often the only door open.
The property itself is unfinanceable conventionally
Vacant buildings, fire-damaged structures, properties with unpermitted additions, half-finished construction, raw land. Conventional lenders decline all of these on condition alone. Hard money lenders look at what the asset is worth as it sits and what it will be worth after your plan.
You need to stop a foreclosure clock
A foreclosure bailout refinance pays off the defaulted lender and buys you 12 to 24 months to sell, refinance or reorganise. It is expensive money that preserves an asset with substantial equity — a trade that is frequently very much worth making.
You need to be the strongest buyer at the table
A hard money proof-of-funds letter with a seven-day close is a genuine negotiating instrument. Sellers regularly accept meaningfully lower offers from buyers who can perform quickly, and that discount often exceeds the entire cost of the financing.
How the process works
Present the property and the exit
Address, purchase price or current value, requested amount, and — most importantly — how the loan gets repaid. Sale, refinance or lease-up. The exit is the deal.
Valuation
A BPO, desktop valuation or full appraisal depending on lender and speed. Some private lenders will move on their own inspection alone.
Term sheet and diligence
Terms usually within 24 to 48 hours. Title, insurance and entity documents run in parallel — this is what determines whether you close in three days or ten.
Close and execute
Fund, execute your plan, and repay at the exit. Most hard money has no prepayment penalty beyond a minimum interest period.
What you will need to qualify
- Meaningful equity in the property (25%+ typical)
- A clear, credible exit strategy
- Property insurance
- Clean, insurable title
- Entity documents if closing in an LLC
- Liquidity for payments and closing costs
The honest drawbacks
What we would want to know if we were you
Hard money is a scalpel and it is expensive. Interest-only at 12% with three points on a $500,000 loan is $15,000 up front and $5,000 a month — sustainable for eight months, ruinous for three years. Never take hard money without a specific, dated, realistic exit. And ask directly about the minimum interest period: many loans guarantee the lender three to six months of interest even if you repay in thirty days, which materially changes the cost of a fast flip.
Hard Money Loans — frequently asked questions
With title work already underway and a responsive borrower, 72 hours to seven days is realistic. Ten to fourteen days is more typical. The bottleneck is almost never the lender — it is title, insurance and entity documentation, so start those the moment you go under contract.
Generally 65% to 75% of as-is value, meaning you bring 25% to 35%. Some lenders will go to 70% of ARV on rehab deals, which can exceed 100% of a discounted purchase price on a genuinely good buy.
Less than anywhere else in lending, but not zero. It affects pricing and it signals reliability. Most private lenders want 600+, and many will go lower where the equity cushion is substantial. Very few will fund at any score without a credible exit.
Points are an origination fee charged as a percentage of the loan, paid at closing. Three points on $500,000 is $15,000. Points are usually negotiable in exchange for a higher rate — worth doing if you expect to repay quickly, and worth avoiding if you plan to hold for the full term.
Yes, and you should plan to. The standard path is hard money to acquire and stabilise, then a DSCR or conventional refinance into long-term debt. Most conventional lenders want six months of seasoning before a rate-and-term refinance, so build that into your timeline.
Related commercial real estate programs
Hard Money Loans sits alongside a number of related structures. If your situation is close to but not quite this product, one of these is probably the better fit — and the same single application reaches all of them.
- Portfolio Loans — One loan across multiple properties, underwritten as a single pool with a single payment.
- Mixed-Use Property Loans — Financing for buildings that combine ground-floor commercial with residential above.
- Commercial Land Loans — Acquisition capital for raw, entitled or infill land ahead of development.
- Permanent Financing — The long-term, fully amortising debt that takes out your construction or bridge loan.
- Mezzanine Real Estate Loans — Subordinate debt that raises total leverage without giving up ownership.
- Acquisition & Development Loans — Combined land purchase and horizontal-improvement financing for subdivisions and pads.
- Refinance (Commercial & Investment) — Replace maturing, expensive or misstructured debt with better terms.
- Blanket Mortgages — A single mortgage secured by several properties, with release clauses as you sell.