Hard money is one of the most misunderstood corners of real estate finance. Everyone thinks they know what it is. Most people are wrong about half the details. This is the plain-English explainer we wish every borrower read before calling us.
After funding 1,000+ hard money loans since 2013, we've answered the same questions hundreds of times. This article puts every one of them in one place — what a hard money loan actually is, what it really costs, who uses it, how fast it closes, what documents you need, and how to tell the good lenders from the bad ones.
What is a hard money loan?
A hard money loan is short-term, asset-based financing for non-owner-occupied investment property. "Asset-based" means the lender underwrites the property — not your credit score. "Short-term" means typically 6-12 months, sometimes up to 24.
It's called "hard" because the loan is secured against a "hard asset" (real estate), and because the terms are tougher than conventional financing — higher rate, shorter term, more skin in the game from the borrower.
In exchange for the tougher terms, you get speed and certainty: hard money lenders fund deals in days, not weeks. They underwrite the deal, not the W-2.
It's called "hard" because the loan is secured against a "hard asset" (real estate), and because the terms are tougher than conventional financing — higher rate, shorter term, more skin in the game from the borrower.
In exchange for the tougher terms, you get speed and certainty: hard money lenders fund deals in days, not weeks. They underwrite the deal, not the W-2.
Who uses hard money?
Fix-and-flip investors. Buying a distressed property, renovating it, reselling at retail. Hard money funds both the purchase and the rehab.
BRRRR investors. Buy, Rehab, Rent, Refinance, Repeat. Hard money is the bridge from acquisition through stabilization, then refinanced into a long-term conventional rental loan.
Construction borrowers. New builds or major renovations where conventional construction financing is too slow or too restrictive.
Bridge borrowers. Investors who need short-term financing between acquisition and a more permanent loan. Common when waiting on a 1031 exchange or a slow conventional approval.
BRRRR investors. Buy, Rehab, Rent, Refinance, Repeat. Hard money is the bridge from acquisition through stabilization, then refinanced into a long-term conventional rental loan.
Construction borrowers. New builds or major renovations where conventional construction financing is too slow or too restrictive.
Bridge borrowers. Investors who need short-term financing between acquisition and a more permanent loan. Common when waiting on a 1031 exchange or a slow conventional approval.
What does a hard money loan typically cost?
The total cost has three components:
1. Interest rate. Industry typical is 10-13%. Charged as interest-only monthly. Higher than conventional because the loan is shorter and riskier for the lender.
2. Origination points. Industry typical is 1-4 points (1 point = 1% of the loan amount). Paid at closing. Some lenders (like Kayak in Arizona) charge zero points.
3. Junk fees. Industry typical is $1,500-$5,000 in "processing," "underwriting," "doc prep," and other administrative fees. Some lenders (like Kayak) charge none.
The lesson: Always compare total cost, not just rate. A 12% lender with no fees can beat a 10.5% lender with $5K in junk fees over a 6-month hold.
1. Interest rate. Industry typical is 10-13%. Charged as interest-only monthly. Higher than conventional because the loan is shorter and riskier for the lender.
2. Origination points. Industry typical is 1-4 points (1 point = 1% of the loan amount). Paid at closing. Some lenders (like Kayak in Arizona) charge zero points.
3. Junk fees. Industry typical is $1,500-$5,000 in "processing," "underwriting," "doc prep," and other administrative fees. Some lenders (like Kayak) charge none.
The lesson: Always compare total cost, not just rate. A 12% lender with no fees can beat a 10.5% lender with $5K in junk fees over a 6-month hold.
What's LTV and why do I keep hearing about it?
LTV = Loan-to-Value. It's the percentage of the property's value that the lender is willing to fund.
Two LTVs matter:
ARV LTV. What % of the After-Repair Value will the lender fund? Industry typical: 65-75%. Kayak is 70%.
LTC. Loan-to-Cost. What % of (purchase + rehab) will the lender fund? Kayak's Arizona program is 85% LTC. Charleston is 80% LTC.
The lender will fund the lesser of these two caps. You have to pencil both.
Two LTVs matter:
ARV LTV. What % of the After-Repair Value will the lender fund? Industry typical: 65-75%. Kayak is 70%.
LTC. Loan-to-Cost. What % of (purchase + rehab) will the lender fund? Kayak's Arizona program is 85% LTC. Charleston is 80% LTC.
The lender will fund the lesser of these two caps. You have to pencil both.
What documents will the lender ask for?
Compared to a conventional mortgage, hard money is shockingly light on paperwork:
• The purchase contract (signed)
• The rehab scope of work + budget
• Comps supporting the ARV
• A simple loan application (basic info, prior deals)
• Proof of funds for your down payment
• Property insurance binder
What hard money lenders generally do not require: tax returns, W-2s, pay stubs, personal credit pull (asset-based lenders), income verification.
• The purchase contract (signed)
• The rehab scope of work + budget
• Comps supporting the ARV
• A simple loan application (basic info, prior deals)
• Proof of funds for your down payment
• Property insurance binder
What hard money lenders generally do not require: tax returns, W-2s, pay stubs, personal credit pull (asset-based lenders), income verification.
How fast can a hard money loan actually close?
The honest answer: as fast as the title company can move. Hard money lenders can issue verbal approvals same-day and have funds wired within a week. The bottleneck is usually the title work and inspection.
Realistic timeline:
• Day 1: Submit deal, get verbal approval
• Days 2-3: Underwriting + appraisal/comps review
• Days 4-7: Title work + insurance binder
• Day 7-10: Wire funds to escrow, close
Compare to conventional: 30-45 days at best, often 60+.
Realistic timeline:
• Day 1: Submit deal, get verbal approval
• Days 2-3: Underwriting + appraisal/comps review
• Days 4-7: Title work + insurance binder
• Day 7-10: Wire funds to escrow, close
Compare to conventional: 30-45 days at best, often 60+.
Red flags when choosing a hard money lender
Vague rate quotes. "It depends" without ever giving you a number is a stalling tactic. A real lender quotes a rate within minutes.
Big junk fees buried in the term sheet. Always demand a total-cost breakdown.
No phone number / hard to reach. If you can't get the decision-maker on the phone before closing, what happens when there's a problem during the rehab?
Out-of-state lender with no local underwriting. They can fund anywhere — but they don't know your market. They'll either overpay (their loss) or underpay (your loss).
Promises to fund every deal. If a lender approves every property, they're not underwriting — they're hoping.
Switch-and-bait pricing. A great rate at application that mysteriously changes a day before closing.
Big junk fees buried in the term sheet. Always demand a total-cost breakdown.
No phone number / hard to reach. If you can't get the decision-maker on the phone before closing, what happens when there's a problem during the rehab?
Out-of-state lender with no local underwriting. They can fund anywhere — but they don't know your market. They'll either overpay (their loss) or underpay (your loss).
Promises to fund every deal. If a lender approves every property, they're not underwriting — they're hoping.
Switch-and-bait pricing. A great rate at application that mysteriously changes a day before closing.
Green flags when choosing a hard money lender
Decision-makers in-house. You can talk to the principal, not just a loan officer.
Same-day verbal approvals. The fast yes (or fast no) is what makes hard money valuable.
Local underwriting. The lender knows your market neighborhoods, comp patterns, and typical rehab costs.
Transparent pricing. Rate + points + fees, all in writing, no surprises.
A history of paid-off loans. Ask for examples. Real lenders have a portfolio they can talk about.
Same-day verbal approvals. The fast yes (or fast no) is what makes hard money valuable.
Local underwriting. The lender knows your market neighborhoods, comp patterns, and typical rehab costs.
Transparent pricing. Rate + points + fees, all in writing, no surprises.
A history of paid-off loans. Ask for examples. Real lenders have a portfolio they can talk about.
Can I use a hard money loan for my primary residence?
No. Hard money lenders almost universally fund only non-owner-occupied investment property. For your primary residence you want a conventional or FHA loan.
Are there prepayment penalties?
Most hard money loans have NO prepayment penalty. You can pay it off whenever you want. Always confirm in writing — Kayak loans never have prepayment penalties.
Got a deal? Get it funded.
Same-day verbal approvals. 5-10 day close. Zero junk fees in Phoenix · 12% / 2 points in Charleston.
Get Funded → Or call Barry directly: (480) 256-2274