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What Is a Hard Money Loan? Lenders, Requirements and Rates

Theresa Stevens, Author at LendingTree

Written by  Theresa Stevens

Rene Bermudez, Author at LendingTree

Written by  Rene Bermudez

Crissinda Ponder, Editor at LendingTree

Edited by  Crissinda Ponder

Updated Content was accurate at the time of publication.
We are committed to providing accurate content that helps you make informed money decisions. Our partners have not commissioned or endorsed this content. Read our editorial guidelines here.

A hard money loan is a type of mortgage that can hand you cash quickly — typically in just a few days. These loans are secured by a physical asset (like real estate) that the lender can repossess if you default on your payments. 

Hard money loans work best for experienced real estate investors, but aren’t usually a good idea for homebuyers seeking owner-occupied financing. That’s because they’re far more expensive than traditional mortgage loans.

Learn more about hard money loans below, including how they work and what to consider before borrowing one.

Key takeaways
  • Hard money loans are ideal for real estate investors who need fast, short-term financing, but they come with high interest rates and short loan terms.
  • Approval for hard money loans is based on the property’s value rather than the borrower’s credit score.
  • This high-cost loan option is best suited for experienced investors working on fix-and-flip projects or time-sensitive property purchases, but is generally unsuitable for first-time homebuyers or long-term financing.

How a hard money loan works

Hard money loans have the same purpose as a traditional mortgage: to finance a real estate purchase. But that’s where the similarities end for the most part. 

Who offers them: Hard money loans don’t come from a bank or other traditional lender. Instead, they come from investment companies and other private businesses. These lenders generally have a less stringent approval process than standard home loans — a hallmark of hard money loans is that your credit score and credit history aren’t taken into account. 

How you get approved: Instead, they mainly base loan approval on your collateral, and typically limit the loan amount to a maximum 60% to 75% loan-to-value (LTV) ratio. 

What loan terms look like: Repayment terms for hard money loans are quite short compared to traditional mortgages, and usually range from six to 36 months.

Hard money loan rates in 2025

Hard money loan interest rates generally range from 9% to 15% and are typically much higher than standard mortgage rates. To put those numbers into context, the average mortgage rate for a traditional, 30-year fixed-rate loan is currently 6.26%, according to Freddie Mac’s Primary Mortgage Market Survey®. The average home equity loan rate is currently above 8%. Interest rates on hard money loans depend on several factors, including your loan amount and property value.

Is a hard money loan right for you?

If you have poor credit or need a large sum of money quickly, a hard money loan could help. Be aware, though, that it’s a very expensive way to get the cash you need — especially if you’re just a first-time homebuyer searching for an affordable way to get into a house — and won’t give you very long to repay the money. 

Most often, hard money loan borrowers are house flippers (people buying fixer-uppers to renovate and resell them) and real estate investors who have been denied by traditional lenders due to complex finances or recent credit events.

When hard money loans make sense

  • Fix-and-flip projects. You need quick funding for properties you plan to renovate and sell within six to 12 months.
  • Time-sensitive purchases. You’re competing in hot markets where cash offers win or you need to close quickly.
  • Investment property purchases. You need an alternative to conventional investment property loans when buying rental properties.
  • Commercial real estate. You’re purchasing unique properties or need more than traditional commercial loan limits.
  • Bridge financing. You need a bridge loan so you can buy a new home before selling your current property.
  • Nonconforming properties. Your property is in poor condition or of an unusual type that traditional lenders won’t finance.
  • Portfolio expansion (BRRRR). You’re an experienced investor using buy-renovate-rent-refinance-repeat strategies.

When hard money loans don’t make sense

  • First-time or low-credit homebuyers. Traditional mortgages offer much lower rates and longer terms for owner-occupied properties — even for those with bad credit or low income.
  • Investors with good credit and steady income. Traditional financing will offer you cheaper rates with better terms.
  • Long-term financing. Hard money loans are expensive and don’t usually come with loan terms longer than two to three years.
  • No clear payoff strategy. You don’t have a solid plan to repay the loan through selling or refinancing. 

What is BRRRR?

Besides being a noise you make when you’re cold, BRRRR stands for “buy, renovate, rent, refinance and repeat” — it’s an acronym and method used by house flippers. If you don’t want to wait the six weeks or so that it takes to close on a mortgage refinance, you could instead use a hard money loan to help you complete the BRRRR process.

Hard money loan requirements

Borrower financial requirements

  • Down payment: 25% to 40%
    You’ll typically need up to a 40% down payment, depending on the lender. Investment properties often require higher down payments than owner-occupied properties.
  • Credit score: No minimum
    Since hard money loans are secured by the property, they can be a good option for people with poor credit who can’t qualify for traditional financing.
  • Income: Enough to support repayment
    Lenders typically want to see evidence that you have enough money coming in to repay the loan.

Property requirements

  • Home equity: 25% to 40%
    If you own the property, you may be required to maintain at least 25% to 40% equity. The loan amount is typically determined by the property’s value, with most hard money lenders offering an LTV ratio of around 60% to 75%.
  • Property types: Varies
    Different lenders may accept different property types, including:  
    • Residential properties (single-family homes, condos, townhomes)
    • Investment properties
    • Fix-and-flip projects
    • Commercial real estate (varies by lender)
    • Land (some lenders)

Ultimately, the easier your real estate would be to sell, the easier a time you’ll have finding hard money lenders who will accept it as collateral.

How to choose a hard money lender

Credit unions and banks don’t typically offer hard money loans. Instead, look to real estate investment companies and private investors. Some examples of hard money lenders include HouseMax Funding and Express Capital Financing. You may qualify with different lenders depending on whether you’re taking out a business hard money loan versus an individual one, and whether the asset is owner-occupied. 

Questions to ask hard money lenders

  • “What maximum loan-to-value (LTV) ratio do you offer?”
  • “What are your typical loan terms (six months, 12 months, 24 months)?”
  • “Do you offer interest-only payments or require principal and interest?”
  • “Are there any origination fees, processing fees or closing costs?”
  • “Do you charge prepayment penalties if I pay off the loan early?”
  • “Do you have any credit score requirements?”
  • “What documentation do you need from me?”
  • “How quickly can you close on a loan?”

How to get hard money loans

1. Compare hard money lenders.

Like with any major purchase, it’s important to compare lenders to find the best fit for your needs. When comparing hard money lenders, consider the company’s reputation, rates, terms and fees. Make sure you also understand each lender’s requirements, including the minimum income, credit score and down payment you’ll need.

2. Select a lender.

Once you’ve compared hard money lenders, you should have a good idea of your preferred company. It can be helpful to choose a lender that has expertise in real estate transactions similar to yours. Be sure to ask the lender any questions you have about your loan contract before signing on the dotted line.

3. Gather your documents.

Collect the documents that are relevant to the transaction, which may include bank statements, tax returns, proof of homeowners insurance and a project budget (if you’re financing a fixer-upper.) You may also need a property appraisal.

4. Fill out the loan application.

Next, it’s time to fill out the hard money loan application. You’ll likely need to provide identification and other supporting documents. Most hard money lenders offer online applications, and some lenders even provide loan offers within 24 hours.

Pros and cons of hard money loans

Pros

  • No minimum credit score requirement: Hard money lenders tend to rely solely on the value of the collateral securing the loan and don’t take the borrower’s credit score into account.
  • Quick closing time: Rather than the loan closing process taking weeks to months, hard money loans generally close within a few days.
  • Short terms: If you expect to repay the loan quickly, even a high interest rate may not add up to a larger bill.
  • Looser underwriting requirements. Hard money lenders are generally more flexible with their approval guidelines than traditional lenders.

Cons

  • High interest rates: Because the lender isn’t taking your credit score into account, the loan is considered riskier and has a higher interest rate than other loan types.
  • Lower maximum LTV ratio: You may only qualify to borrow up to 75% of the asset’s value. Meanwhile, you could borrow up to 85% with a home equity loan or home equity line of credit (HELOC).
  • Risk of losing the collateral: If you default on the loan, you’ll lose the asset you put forth to secure the loan.
  • Less regulatory oversight. Hard money lenders aren’t as regulated as standard mortgage lenders.

Alternatives to hard money loans

If you decide a hard money loan isn’t right for you, here are some alternatives to consider:

  • Land loans. If you want to buy a lot of land that doesn’t have a house built on it yet, a land loan could be an option.
  • Private loans. Finding a private investor, such as a relative or friend, could end up being cheaper than a hard money lender.
  • HELOCs. If you have equity in your current home, you could use a HELOC to finance another property purchase. However, this is a risky option, since your current home will be used as collateral on the credit line.
  • Investment property refinance loans. You can tap the equity in your investment property with an investment property refinance loan and use the equity to buy other properties. You could also use the funds to pay off an existing hard money loan.
  • Peer-to-peer loans. Another way to access funds for a real estate purchase is a peer-to-peer loan. Like hard money lenders, peer-to-peer lenders typically have less stringent approval requirements, making it an option for people who don’t qualify for traditional mortgages.
  • Cash-out refinancing. A cash-out refinance involves replacing your current mortgage with another, larger mortgage and pocketing the difference between the two. You can use the money you receive for various purposes, including a rental property purchase.
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Home Home Mortgage What Is a Hard Money Loan? Lenders, Requirements and Rates