Hard Money Loans

Insights about hard money loans for real estate investors. What is hard money? What are the requirements? What are the typical guidelines - maximum LTV, interest rates, points, fees, term, closing time? Why do investors use hard money? How to find reputable hard money lenders in the United States.

All About Hard Money

If you’re ready to search for hard money lenders, select a state from the drop-down menu above. If you want to learn more about hard money loans, continue reading to find a wealth of valuable information – typical guidelines, requirements, loan scenarios, average interest rates, and summaries of hard money loans funded by lenders on our platform. The content on this page was written by the Lender Link team. Artificial intelligence was not used to generate any of the content on this page. For the sake of many real estate investors who are familiar with hard money lending, we’ll start off with the typical guidelines before getting into the basics.

Typical Hard Money Lending Guidelines

Loan Amounts
Most hard money lenders have a minimum loan amount of $100,000, and a very small percentage offer loans less than $75,000. For residential investment properties, many hard money lenders offer loan amounts up to $3,000,000, and some can go up to $5,000,000. A small percentage of lenders consider luxury homes. Hard money lenders that focus more on commercial real estate tend to offer loan amount between $1,000,000 and $15,000,000.

Interest Rates
At this time, the interest rate for most hard money loans is between 10% and 12%. Some hard money lenders charge up to 15% for riskier loans. In California, the interest rates tend to be between 9% and 11% for 1st mortgages.

Points and Fees
Most hard money lenders charge 2 points as an origination fee, which is 2% of the loan amount. It’s rare to find lenders charging less than 2 points. Some lenders will charge 3 points. In addition to points, many hard money lenders charge a separate fee for underwriting and processing the loan. These additional charges are commonly known as “junk fees.” There are many ways for hard money lenders to structure their fees. Some lenders charge 3 points but no junk fees. Some charge 2 points plus junk fees. Some charge 1 point but then charge a higher interest rate. Some lenders charge 1 point when the loan funds and another point when the loan is paid off.

Down Payment for Purchase Bridge Loans
For hard money loans that do not include a rehab or construction budget, borrowers typically need a 30% minimum down payment while the lender funds 70% of the purchase price. Hard money lenders don’t care if you feel the purchase price is below market value. In hard money, the purchase price is the value, and the borrower needs to have real equity in the deal. Even if a hard money lender advertises a maximum loan-to-value of 70%, it doesn’t mean that all borrowers will get that maximum leverage. There are a number of factors that can cause a hard money lender to reduce their maximum leverage – property location, property condition, low credit score, unique property type, etc.

Leverage for Residential Rehab Loans
The majority of hard money lenders will fund up to 85% of the purchase price and 100% of the rehab budget, so long as the loan amount does not exceed 70% of the after-repair value. This structure can be stated by lenders as 85/100/70, and it requires borrowers to contribute 15% of their own cash to the purchase. Some lenders will fund 90% of the purchase price, but typically only for real estate investors with lots of experience and strong financials.

Leverage for Refinance Bridge Loans
For refinance hard money loans, most lenders max out at 65% loan-to-value. Some lenders are more conservative. Most hard money lenders require a formal appraisal, but there are some lenders that do their own in-house valuation, so long as there are enough comparable sales in the area.

What is a hard money loan?

A hard money loan is a short-term mortgage, secured by investment real estate, which bears higher costs and lower leverage than mortgages provided by banks and institutional lenders. The interest rates for hard money typically range from 10-12% annually, and most lenders charge at least 2 points as an origination fee. Although it is expensive, hard money exists primarily to solve a short-term need for real estate investors. Most hard money loans have a maximum term of 12 months. Some lenders offer a term up to 3 years, but this is rare, and most lenders expect their borrowers to have a solid exit strategy that will pay off a hard money loan in less than 1 year.

While traditional financing qualification focuses on a borrower’s financial strength, hard money loans qualify primarily based on equity in the subject property. The maximum loan-to-value (LTV) is typically 70% for most hard money loan. If your loan is for the purchase of a property, you’ll need a down payment of at least 30%. Many lenders are more conservative with a 65% maximum LTV, and a small percentage of lenders can go up to 75% LTV. If you’re lucky enough to find a hard money lender that considers vacant land as collateral, the maximum LTV is typically 50%. So if you’re purchasing land, you’ll need a 50% down payment.

The property securing the loan can be a commercial property (multifamily, retail, industrial, office, hotel, self-storage facility, etc.), but the majority of hard money loans in the United States are secured by residential investment properties – single family homes, condos, duplexes, triplexes, fourplexes. Residential and small multifamily properties are the most desirable assets that hard money lenders consider as collateral. A very small percentage of hard money lenders consider vacant land. Land is the least desirable collateral for lenders and bears the highest risk for them.

Investment Properties Only

One of the most important elements of hard money lending is that it is only for investment or business purposes. Hard money lenders do not consider a borrower’s primary residence (homestead) as collateral. The main reason for this is government regulations. Residential consumer-purpose mortgages are regulated by the federal government and come with many compliance requirements. There are a few exceptions in California and Arizona, but in most other states, it’s not possible for a borrower to use their primary residence (or 2nd home) as collateral for a hard money loan.

See a List of Direct Hard Money Lenders

Our website is a resource where real estate investors and brokers can find reputable direct hard money lenders. View lenders’ detailed profiles and contact them directly. Lenders pay us a monthly fee, so there is no cost to see the lender’ profiles and contact information. Select a state…

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Types of Hard Money Loans

Here are some common types of hard money loans and example scenarios…

Fix and Flip
By far, the most common loan type/scenario in hard money lending is for residential property rehab projects, commonly known as Fix & Flip. It includes funds to purchase a house and funds to rehab/renovate it, with the goal of increasing the value and selling the property for a profit within 12 months. With fix & flip hard money loans, the loan amount must be no more than 70% of the after-repair value. Many real estate investors visit our website looking for 100% financing for fix & flip projects, but it’s quite rare and not available in most states. Most hard money lenders require a 10-20% down payment for property rehab projects so that the borrower has some equity in the deal, commonly called “skin in the game.” Not all hard money lenders offer house flipping loans. Search for fix & flip lenders.

Purchase Bridge Loan
There are many hard money loans which have nothing to do with rehabbing or adding value to properties. Many real estate investors simply need quick financing to buy an investment property. A common scenario is for the purchase of a rental property where the seller requires the buyer to close the transactions in 2 weeks. The buyer would ideally get a loan from their bank, but it will take around 30 days to secure the financing. The buyer can use a hard money loan just to get the deal done within the 2-week period. The real estate investor will put down at least 30% cash to close the deal. The fees and interest rate will be high, but this is an opportunity cost, and the investor can refinance into a bank loan shortly after the closing. This scenario is commonly called a “bridge loan.”

Refinance Bridge Loan
Many hard money lenders provide short-term loans to refinance an investment property. The leverage for refinance hard money loans is typically 5-10% lower than the maximum leverage for purchase loans. A common scenario these days in a high interest rate environment is a commercial property’s loan is maturing, and the borrower is unable to qualify for another long-term loan, likely due to a low debt service coverage ratio (negative cashflow). So long as the loan-to-value is not more than 65%, a hard money lender can refinance the loan and give the borrower up to 2 years to secure a long-term loan which will pay off the hard money loan. This scenario is commonly called a “bridge loan.”

Equity Cash Out
Many hard money lenders provide equity cash out loans secured by investment real estate, so long as the loan-to-value is not more than 65%. Unlike with equity loans that homeowners get from a bank, hard money lenders only consider 1st mortgages (aka senior lien position). Hard money 2nd mortgages are almost impossible to obtain in most states. California and Arizona tend to be the only states where 2nd mortgages are offered by hard money lenders. A common scenario we see for equity cash out loans is when a residential real estate investor owns a rental property free-and-clear (no mortgages), and they want to cash out some of their equity to buy another rental property. A hard money lender can put a lien on the property and provide the cash out funds to the investor, typically within 10 business days. For commercial property owners, we typically see cases where the investor needs funds for a major repair of their property. Using hard money to tap some of their equity can be a quick and easy way to get the funds. One of the key qualifications for a hard money cash out loan is to have a solid exit strategy. Hard money lenders will want to know how their loan will be paid back within the 1-year or 2-year loan term.

Ground-Up Construction
Many home builders throughout the United States prefer to use hard money lending instead of banks to finance their construction projects. With hard money, builders can get higher leverage and receive draws faster, while avoiding a lot of red tape. Most hard money lenders do not offer loans for land acquisition and soft costs. The typical scenario for a hard construction loan is a home builder already owns the land, has completed the horizontal development, and is ready to go vertical. A hard money lender will typically fund up to 85% of the project costs, and the builder has to provide 15% equity to the project. Some lenders will consider the equity in the land instead of a cash contribution. Only a small percentage of hard money lenders consider ground-up construction since it bears a higher risk than rehab projects and requires additional expertise. The lenders who do provide construction loans almost always require the borrower to have experience with ground-up projects. Search for Residential Construction lenders.

This is also known as a Buy & Hold strategy, or BRRRR (Buy, Rehab, Rent, Refinance, Repeat). It’s only for residential investment properties. A hard money lender can provide the funds to purchase a property and the funds to renovate the property. Instead of selling the property upon completion of the rehab project, the real estate investor would find a tenant and refinance into a long-term rental loan. Most lenders fund 80-90% of the purchase price and 100% of the rehab costs. The maximum loan-to-after-repair value is 70% for most lenders. Aside from the ARV, hard money lenders will want to make sure that the investor can qualify for the long-term refinance loan. Long-Term Rental, also known as DSCR loans, require a 680+ FICO score and a debt service coverage ratio over 1.2. The property must be cash-flow positive, meaning the rent collected must be more than the expenses – mortgage payment, property taxes, insurance, HOA dues, etc.

DSCR loans are not Hard Money Loans. Although many hard money lenders offer DSCR loans to their borrowers, all long-term rental loans are all sold to the institutional secondary market – insurance companies, hedge funds, etc. Most hard money lenders that offer DSCR loans do not use their own balance sheet to fund the loan. They typically partner with a wholesale lender that has the ability to sell many DSCR loans in bulk to the secondary market. With frequent movement in interest rates, it is extremely risky for a hard money lender to hold a 30-year rental loan on their balance sheet. Search for DSCR lenders.


Top 10 Hard Money Lenders in the United States

forecasa logo

According to Forecasa™, here are the Top 10 Hard Money Lenders in the United States, ranked by the number of loans* originated from June 2023 to May 2024.

  1. Kiavi
  2. RCN Capital
  3. ROC Capital
  4. Lima One Capital
  5. Renovo Financial
  6. Constructive Loans
  7. Capital Fund I
  8. American Heritage Lending
  9. Velocity Commercial Capital
  10. Easy Street Capital

Five of the top 10 hard money lenders in the country are listed on our platform. Click the links above to view their profiles. We have relationships with the other five, but they are not subscribed for our service at this time.

Constructive Loans and Velocity Commercial Capital are wholesale hard money lenders, meaning they do not work with real estate investors directly. Roc Capital is also a wholesale lender, but they own/operate 2 retail hard money lending companies – Civic Financial Service and Finance of America Commercial.

* The number of loans used to rank the top 10 lenders includes long-term rental loans, which are not technically considered to be hard money loans. In the next few months, Forecasa™ will begin providing us with a list of top 10 lenders based on short-term loans (up to 2 years) versus 30-year rental loans. You’ll find their top lenders data for many states on our platform. Scroll to the top of the page to select a state.

Forecasa™ gives investors and lenders in the private real estate market powerful analytics and actionable insights. They help you skip the hassle of combing county records and focus on closing deals. With detailed market trends, investor and lender activities, and competitive benchmarking, you can make smart, strategic decisions. Some of their services include dynamic market reports, transaction-level details, customer analytics, borrower verification, and in-depth profiles of investors, lenders, and capital partners.

5 Ways Hard Money Lenders Get Capital

This topic of where hard money capital comes from may not be of interest to people who are not in the mortgage business. If you’re a real estate investor, you may not care how your lender gets their capital, and perhaps you shouldn’t care. Most hard money lending firms have multiple sources of capital which they can tap for various types of loan requests.

  1. Sell to Institutions
  2. Private Mortgage Fund
  3. High Net Worth Individual Investors
  4. Family Offices
  5. Other Hard Money Lenders

It can be a big effort to figure out a hard money lender’s capital source per each deal, and perhaps it’s a waste of time. As long as you’re getting good service, competitive pricing, and the lender can execute, it may not be worth thinking so much about where the money comes from or what happens to your interest payments after the loan funds.

Hard Money Interest Rates Data

Want to know the average interest rate for hard money loans in the United States? We have data from 2 companies that provide software to hard money lenders.

lightning docs logo

According to the hard money loan documents software company, Lightning Docs, the average interest rate for hard money loans in the 1st quarter of 2024 was 11.47%. The average loan amount was $392,628. These stats are the average of 3,886 short-term hard money loans (including bridge, rehab, and ground-up construction) funded for properties in 41 states between January 1, 2024 and March 31, 2024 by multiple hard money lenders that use Lightning Docs as their preferred software provider to prepare loan documents.


analytics logics logo

According to hard money data provider, Analytics Logics, the average interest rate for hard money loans in the 1st quarter of 2024 was 11.16%. Lenders charged an average of 2.5% points (origination fee). The average LTV (loan-to-value) for hard money loans in 47 states was 62.79%, and the average loan amount was $365,507. These stats are the average of all the hard money loans which were funded between January 1, 2024 and March 31, 2024 by the many lenders who use Liquid Logics’ loan origination software to manage their lending operations.

Pros and Cons of Hard Money Loans

Speed is the most common reason why you would get a hard money loan. While convention lenders take 3-6 weeks to fund a loan, hard money lenders typically fund in 1-2 weeks. There are not many requirements to qualify for a hard money loan. The main thing hard money lenders care about is equity in the deal and the exit strategy. Many hard money lenders do care about the borrower’s credit score but it’s not always the deciding factor.

For real estate investors who flip houses, there are not many good financing options for them other than hard money. Banks don’t like short-term loans and they don’t like to lend on properties in poor condition. Instead of borrowing from hard money lenders, some real estate investors borrower from wealthy individual lenders who are not operating a professional lending business.

The biggest downside to using hard money is the high cost. With interest, points and fees, the true cost of a hard money loan typically range from 12% to 16% annually. However, it’s not meant for long-term financing. Most hard money loans have a maximum term of 12 months. Another downside is the loan-to-value that hard money lenders require. For a property purchase bridge loan, borrowers need a minimum down payment of 30%, and sometimes up to 40% depending on the property type and location. To get a refinance bridge loan, hard money lenders don’t lend more than 65% of the property value.

10 Toughest States for Hard Money Lenders

There are several states around the country that many hard money lenders avoid, mainly due to state regulations and compliance requirements which make it difficult to do business in or difficult to foreclose in. If a borrower defaults on the loan, the lender’s recourse is to proceed with foreclosure. If the foreclosure process is too difficult, it adds a lot of risk for the hard money lender. When it’s difficult for a hard money lender to do business in a state, the result is less alternative financing options for real estate investors.

  1. Nevada
    Out of all the 50 states, Nevada imposes the toughest regulations and compliance requirements for hard money lending and consumer mortgage lending. In order to lend on real estate in Nevada, a lender must have a state mortgage license plus a brick & mortar office in the state. The person originating the loans must be a Nevada resident. Additionally, Nevada typically performs an annual audit of all mortgage loan files to confirm the loans were made in compliance with the state and federal lending laws. Real estate investors seeking a hard money loan in Las Vegas or Reno will have a limited pool of lenders to choose from, and that’s why the interest rates and fees tend to be on the high side, compared to other states. On the bright side, Nevada is a non-judicial foreclosure state, so it doesn’t take too long for a hard money lender to complete a foreclosure if the borrower defaults on the loan.
  2. New York
    Hard money lenders avoid lending on real estate in New York because of the extremely long foreclosure process. If a property owner defaults on a mortgage in New York, it could take 2 to 4 years for a hard money lender to complete the foreclosure process. The main reason is New York’s court system is always backed up with more cases than their court system can handle. Lenders can incur huge losses with legal fees and not receiving interest payments. There is a strategy which many hard money lenders use to avoid the long judicial foreclosure process in New York. Click here to watch or read our interview with Tower Fund Capital, a direct hard money lender based in Manhattan. Even though it’s tough for lenders to foreclose in the state, we still have 17 hard money lenders listed in New York as of July 2024.
  3. Tennessee
    Some hard money lenders avoid doing business in Tennessee because of the state’s usury laws, which limits the amount of interest a borrower can be charged. The limit was 10% for several year but was increased to 12.50% in July 2024. If a hard money lender wants to charge more, perhaps can charge higher points and fees than they would in other states. The usury law is not a major detriment to hard money lenders, but some lenders just avoid all states which have unique lending laws that may affect their business. That said, we still have 17 hard money lenders listed in Tennessee as of July 2024.
  4. Vermont
    Vermont has licensing and compliance requirements for business-purpose lending. With such a small population and few opportunities, it’s not worth the effort and cost for hard money lenders to do business in Vermont.
  5. North Dakota
    There are a few reasons why virtually no hard money lender does business in North Dakota. A large percentage of the properties in North Dakota are on tribal lands and Indian reservations, which complicates title and foreclosure. The state’s small population of less than 800,000 is spread out over a vast area, so many properties are considered rural, which makes it tough for real estate valuation. Lastly, North Dakota requires licensing for business-purpose lending, which is a waste of time and effort for hard money lenders due to the small population.
  6. South Dakota
    Hard money lending in South Dakota is almost as non-existent in North Dakota, for many of the same reasons – excessive regulation, title issues with properties on reservations/tribal lands, and a small population of around 900,000 which is spread out over a vast area.
  7. Utah
    Mortgage licensing requirements in Utah make it tough for hard money lenders to do business in the state. Some lenders find it’s worth the effort due to the huge growth in the Salt Lake City market. As of July 2024, we have 11 hard money lenders listed in Utah.
  8. Oregon
    The state of Oregon has some unique regulations which make it a bit tough for lenders to do business in the state, but it’s really not as tough as some of the other states on this list. The hard money lenders that are based in Oregon have no problems dealing with the compliance requirements and are glad to have less competition. As of July 2024, we have 15 hard money lenders listed in Oregon, and 3 of them are local lenders.
  9. Idaho
    Idaho requires hard money lenders to have a license for lending on residential real estate (1-4 units) but not for commercial real estate. Since most hard money lenders focus on residential investment properties, many of them avoid lending in Idaho. As of July 2024, we have 9 hard money lenders listed in Idaho.
  10. Alaska
    Alaska doesn’t have many regulations or compliance requirements for hard money lending, but foreclosing on a property in the state could be a logistical nightmare since it’s so far away from the mainland and has a small population. Outside of Anchorage, properties in Alaska are mostly considered rural and don’t have enough sales comps. In case of a loan default and foreclosure, hard money lenders don’t want to end up owning a property in Alaska.