What Is a Hard Money Loan?
A hard money loan is short-term financing secured by real estate rather than your income or credit history, built for investors who need to move fast on a deal.
Hard money, at a glance
Typical terms on a fix-and-flip
| Purchase financed | 80%–90% |
| Rehab financed | 80%–100% |
| Max loan-to-ARV | 70% |
| Rate | 8.5%–12% |
| Term | 6–12 months |
| Typical close | 1–2 weeks |
How does a hard money loan work?
A hard money lender sizes your loan on the deal, not your paycheck. SFI Loans funds 80% to 90% of the purchase price plus 80% to 100% of rehab costs, capped at 70% of the property's after-repair value. Because the loan is secured by the property itself, SFI Loans can evaluate and underwrite your deal before you sign a contract, so financing is confirmed before you commit an earnest money deposit.
Also called private money loans, hard money loans generally require far less time and paperwork to close than a bank loan. You don't need to provide your work history, W-2s, paystubs, or tax returns. Approval depends on the cash you have in the bank, your experience, and the economics of the deal you're looking at.
How is it different from a bank loan?
| Hard money | Conventional bank loan | |
|---|---|---|
| Approval based on | The property and the deal | Income, tax returns, credit history |
| Typical close time | 1–2 weeks | 30–45+ days |
| Term length | 6–12 months | 15–30 years |
| Best for | Fix-and-flip, fast acquisition | Owner-occupied; investor loans for established borrowers |
Banks do lend on fix-and-flips too, but usually only to established investors with a strong balance sheet and income, and on shorter one-to-two-year terms. A hard money loan is approved on the deal itself, so it's open to more investors and closes far faster.
What does it cost?
Rates typically run 8.5% to 12%, with a 1% to 2% origination fee on most loans. Payments are interest-only, and there's no prepayment penalty if you sell or refinance early, which is the normal outcome on a fix-and-flip.
What do I bring to closing?
Plan on bringing 20% to 25% of the total project cost (purchase price plus rehab cost) in the bank prior to closing. Those funds cover your down payment, closing costs, ongoing interest payments, and other expenses during the term of the loan.
Hard money loan questions, answered
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Lending in Texas, Colorado, Georgia, Florida, South Carolina, North Carolina, and Tennessee. See the Colorado Springs page for local terms.