When you are ready to flip your first house but do not have $200,000 sitting in a bank account, hard money loans are the financing tool most real estate investors turn to. They are fast, flexible, and designed specifically for fix and flip deals — but they come at a cost you need to understand before signing anything.

This guide explains exactly how hard money loans work, what they cost, and how to find the right lender for your deal.

What Is a Hard Money Loan?

A hard money loan is a short-term, asset-based loan provided by a private lender or lending company — not a bank. Instead of qualifying you based on your credit score and income (like a traditional mortgage), the lender bases the loan on the value of the property you are buying.

Because the property is the collateral, hard money lenders can approve loans in days rather than weeks, making them ideal for the fast-moving world of real estate investing.

How Hard Money Loans Work

Here is the typical structure of a hard money loan for a house flip:

• Loan amount: 65–80% of the purchase price (Loan-to-Value, or LTV). Some lenders also finance 100% of repair costs.
• Loan term: 6–18 months (short-term by design — you pay it off when the flip sells)
• Interest rate: 9–15% annually
• Origination fee: 1–4 points (1 point = 1% of the loan amount)
• Payments: Interest-only monthly payments during the term
• Repayment: Full principal due when property sells or at end of term

Hard Money Loan Costs: Real Example

Let’s say you are borrowing $140,000 on a flip:

• Origination fee (2 points): $2,800 upfront
• Monthly interest at 12% annually: $1,400/month
• 4-month flip total interest: $5,600
• Total financing cost: $8,400

This is why holding time matters so much on a flip. Every extra month costs you $1,400 in interest alone — not counting taxes, insurance, and utilities.

Hard Money vs. Traditional Mortgage: Key Differences

• Approval speed: Hard money: 3–7 days. Bank mortgage: 30–60 days.
• Qualification basis: Hard money: property value. Bank: your income and credit score.
• Interest rate: Hard money: 9–15%. Bank: 6–8% (but banks rarely lend on distressed properties).
• Loan term: Hard money: 6–18 months. Bank: 15–30 years.
• Purpose: Hard money: investment/flip properties. Bank: primary residences.

Banks will not lend on distressed properties because they cannot appraise them. Hard money lenders understand investment properties and underwrite them differently.

How to Qualify for a Hard Money Loan

Qualification is much simpler than a traditional mortgage. Most hard money lenders look at:

• The deal itself: Does the ARV support the loan? Is there enough equity? This is the #1 factor.
• Your down payment: Typically 20–35% of the purchase price
• Your experience: First-time flippers may face slightly stricter terms or lower LTV
• Exit strategy: How will you repay the loan? (Sell the flipped home)
• Credit score: Some lenders check it, others do not. 600+ helps but is often not required.

Where to Find Hard Money Lenders

• Local real estate investor associations (REIAs): Every major city has one. Hard money lenders sponsor these events and actively seek borrowers.
• BiggerPockets.com: The largest real estate investor community online. Lenders advertise there and members refer lenders they have worked with.
• Google search: Search “hard money lender [your city]” for local lenders who know your market.
• Online hard money platforms: Lima One Capital, Kiavi (formerly LendingHome), RCN Capital, and CoreVest are national lenders that fund flips across the US.
• Mortgage brokers: Some brokers specialize in investor loans and can connect you with multiple hard money lenders.

Questions to Ask a Hard Money Lender Before You Borrow

• What is your maximum LTV on purchase price and ARV?
• Do you fund 100% of repair costs? Are draws based on inspections?
• What are your origination points and any other fees?
• Is there a prepayment penalty if I sell early?
• How quickly can you close once I have a deal under contract?
• Do you lend on the market I am buying in?

Hard Money Loan Pitfalls to Avoid

• Borrowing too much: Do not borrow the maximum available. Keep a cash reserve for overruns.
• Underestimating the timeline: If you think 3 months, plan for 5. Delays are normal on flips.
• Not reading the fine print: Some loans have extension fees if you need more time. Know the terms before you sign.
• Using a lender who does not know your market: Local lenders often move faster and understand regional property values better.

Run the Full Numbers on Your Financed Deal

Key Takeaways

• Hard money loans are short-term, asset-based loans approved in days — not weeks.
• Typical terms: 65–80% LTV, 9–15% interest, 1–4 points origination, 6–18 month term.
• Qualification focuses on the deal quality, not just your personal finances.
• Every extra month on a flip costs you in interest — speed is critical.
• Find lenders through local REIAs, BiggerPockets, or national platforms like Kiavi and Lima One.

Hard money loans make house flipping accessible to investors who do not have hundreds of thousands in cash. Understand the costs fully, model your deal before you borrow, and always have a cash reserve for the unexpected.