The Quick Read: Not directly. A hard money balloon is the full principal falling due at maturity, so the note itself never lets you keep the loan and the property past that date. You keep the rental only by refinancing into long-term financing, getting a paid extension, or paying off the bridge with cash.
- The balloon is roughly the original loan balance, because these notes are interest-only.
- The usual way to hold is a long-term DSCR refinance, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
- An extension is lender discretion and usually costs a fee.
- The new lender’s appraisal sizes the new loan, not your projected after-repair value.
- Past maturity, the note is typically in default.
Hard money programs are built to be temporary, and the balloon is the mechanism that forces an exit. This article covers what the note says, the four exits, where a hold breaks down, and how to decide.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
What Is a Hard Money Balloon, and Where Is It in Your Note?
The balloon is the unpaid principal due on the maturity date. The CFPB defines a balloon payment as one large payment at the end of the term, on loans built so the scheduled payments do not pay the balance down.
Hard money works the same way. On the program Lendmire brokers, terms run 6 to 18 months, interest-only, with no prepayment penalty, all varying by lender, property, and experience. Because you pay interest only, the balloon sits close to your original loan amount. Look for three things in the note:
- the maturity date;
- any extension option and its fee;
- the default triggers.
Default is not only missed payments. Lapsed insurance or an unapproved transfer of the property can also trip it.
Key Terms Defined
Balloon payment: The full remaining principal due at maturity on a loan that does not fully amortize.
Maturity date: The day the note’s term ends and the payoff is due.
Payoff statement: A lender-issued figure for the exact amount owed on a given date, usually with a per-diem interest amount and an expiration date.
Seasoning: The ownership period a refinance lender wants before it sizes a loan on appraised value instead of cost.
DSCR: Monthly rent divided by the full housing obligation of principal, interest, taxes, insurance, and any HOA dues.
Extension: A lender-approved push of the maturity date, typically for a fee.
What Are Your Four Options at Maturity?
You can sell, refinance, extend, or default. Only the first three keep you in control. Holding the rental long-term means refinancing, or extending long enough to get the property ready to refinance.
| Option | Fits when | Main risk |
|---|---|---|
| Refinance to DSCR | Leased, rent covers payment | Appraisal or payoff gap |
| Extend the bridge | Rehab or lease-up unfinished | Fee, lender discretion |
| Sell | Equity thin or numbers fail | Giving up the hold |
| Pay cash | Liquid reserves on hand | Tying up capital |
Refinancing one hard money loan into another is hard to count on. Most lenders treat a bridge as a one-time tool, so plan on long-term rental financing as the takeout. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The complete DSCR loans guide explains how those loans work.
What Does the Note Protect? (Less Than You Think)
Consumer balloon protections generally do not reach investor hard money. The CFPB’s balloon page is written for consumer mortgages. Federal consumer credit rules exempt credit extended for a business purpose, and credit to buy or improve non-owner-occupied rental property is treated as business purpose.
The practical effect: your note controls. If the loan says the balloon is due in full on the maturity date, that is the term, with no consumer grace rules behind it.
Business-purpose status depends on the facts, though. Compliance Alliance notes that not every investment property is exempt, and owner-occupancy and unit count matter. Everything here assumes non-owner-occupied rental collateral.
What Does “Holding” Actually Require?
Holding requires a property a long-term lender will take as collateral. Think of it as four tests:
1. Rent-ready or leased. A leased unit with documented rent is the cleanest file. Some programs allow a vacant unit with appraisal-supported market rent. That is lender-specific, and it is a thinner file.
2. Coverage. On a DSCR refinance, 1.00 is where select programs start. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
3. Value. The new lender orders its own appraisal. Your rehab budget and projected value do not size the loan.
4. Documents. Entity documents, insurance, credit, a payoff statement, and reserves all get reviewed. On the network’s DSCR programs, most want credit around 660, with a 620 floor in parts of the network, and reserves commonly around 6 months of PITIA, varying by lender, leverage, and loan size.
LLC-held properties are routine, subject to program terms, but the entity paperwork has to be complete and the title vesting has to match the payoff.
How Does the New Lender Size the Loan?
The new loan is sized on the lower of what rent supports and what value supports. Most DSCR cash-out files in the network top out around 75% LTV, with about 6 months of seasoning as the common expectation. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Here is the part that catches investors. Hard money often funds a high share of project cost. On the network’s program that can reach 93% of project cost at 5+ completed projects, capped at 75% of after-repair value. A DSCR cash-out is capped lower. When the bridge payoff plus exit costs exceeds the new loan, you bring cash to closing. Rent can be strong and the refinance still not clear.
The break-even is simple:
Minimum appraisal = (bridge payoff + exit costs) ÷ the new loan’s LTV cap.
Each month you wait adds interest to the payoff, which raises that minimum.
Run the numbers on a modeled case. Say a bridge payoff and costs equal 70% of what you hope the home appraises for. At a 75% cap, you have cushion. If the appraisal lands 10% light, the same payoff is nearly 78% of value, and you are over the cap. That is the gap you cover with cash, a smaller payoff, or an extension while you sort it out. This is an illustration, not a quote.
On value basis, a recent purchase may be sized on cost basis, meaning price plus documented rehab, until seasoning passes. After that, appraised value controls. A payoff-only refinance is generally treated more lightly than cash-out. Terms vary by lender. The network’s DSCR purchase files typically land at 75% to 80% LTV, but a refinance of your own bridge follows the refinance caps above.
One more point. Clearing 1.00 means rent covers PITIA. It does not mean positive cash flow, since repairs, vacancy, management, utilities, and capex sit outside the calculation.
What If the File Does Not Fit? A Decision Guide
Most failures come from one of five situations. Each has a fix.
| Situation | Likely path |
|---|---|
| No tenant yet | Extend, or find a vacant-friendly program |
| Appraisal short | Reconsideration packet, cash in, or extend |
| Payoff exceeds new loan | Bring cash, or sell |
| Inside seasoning window | Payoff-only refi, wait, or extend |
| Coverage under 1.00 | Select-lender sub-1.00 path, adjusted terms |
Appraisal short. Ask for a reconsideration with recent nearby sales and condition adjustments before you give up on the number. It recovers value more often than investors expect, though not every time.
Inside seasoning. If you bought recently, created equity may not be accessible yet. A payoff-only refinance can retire the bridge without pulling cash out.
Short-term rental collateral. Leverage limits and hosting-history expectations differ. The network’s STR programs cap purchases at 75% LTV and cash-out around 70% for short-term rental collateral, with about 12 months of hosting history expected. Short-term rental rules can vary by city, county, HOA, and property type, so confirm local rules before relying on projected rental income. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Past maturity. The loan is typically in default and default interest accrues. A notice of default can follow, though foreclosure is usually a last resort. Do not drift into this on purpose.
When Is an Extension the Right Move?
An extension is right when the property is close to ready and time is the only missing piece. It is lender discretion. Lenders favor borrowers who have paid on time, and the fee is usually paid with a payment or added to the payoff.
Ask early, and bring a plan, not a plea:
- the remaining rehab scope and a realistic finish date;
- a lease or listing evidence showing the tenant is coming;
- a refinance application already in process.
An extension buys runway, but it costs carry and does not fix a weak file. If the numbers will not clear in three more months, they will not clear in six. In that case the extension only delays the sale.
When Is Selling the Better Call?
Sell when the payoff plus exit costs leaves little equity, when rent cannot reach coverage the refinance lenders want, or when you cannot fund the gap. This is a genuine toss-up on thin files. Holding feels like the goal, but a clean sale beats a default that raises future capital costs.
Sell also if you do not want to own the asset long-term. The balloon is a decision point, not only a problem.
What Is the Work-Backward Timeline?
Start the exit well before maturity. Practitioners commonly begin the takeout 60 to 90 days out, and earlier is safer on a first refinance. Here is the sequence:
1. Months out: confirm the exit. Pull the note, the maturity date, and the extension terms. Decide hold or sell.
2. Before the file goes in: assemble documents. Entity papers, insurance, lease, rent evidence, credit, and reserves documentation. Order a payoff statement and note its expiration.
3. At application: set the appraisal. The lender orders the appraisal and a rent schedule. The 1007 form covers single-family and the 1025 covers small-income properties, for market rent on a vacant unit.
4. Run the extension in parallel. If the file looks tight, request the extension while the refinance is in process, not after it stalls.
5. At payoff: reconcile. The new lender pays off the bridge and the lien is released. Settlement reconciliation matters here, since per-diem interest changes the payoff figure by the day.
If you are already close to maturity or past it, skip straight to steps 2 and 4. Call the bridge lender first. Lender discretion works better when you call before the date than after. Lendmire’s piece How to Refinance Hard Money Before the Balloon Payment Hits covers that sequence in more depth.
Mistakes That Derail the Hold
- Assuming the balloon rolls over. It does only if the note prices an extension or the lender agrees.
- Sizing on ARV. The new lender’s appraisal sizes the loan, not your projection.
- Stale payoff statements. Per-diem interest and expiry dates move the number.
- Ignoring the new loan’s term. Confirm the replacement is a long-term structure. The network’s spine is the 30-year fixed, so there is no balloon on that product.
- Starting at maturity. The file needs room for an appraisal reconsideration if value comes in light.
- Entity mismatch. The borrower, the title, and the payoff need to line up.
Lendmire’s piece How to Stabilize a Transitional Rental on a Hard Money Bridge Loan covers getting the property to a refinance-ready state.
Frequently Asked Questions
Can I just keep making interest payments past the balloon date?
Typically not. The balloon is due in full on maturity, and continuing interest-only payments without an agreement leaves the note in default. A written extension is the only clean way to keep paying interest.
Does a DSCR loan have its own balloon?
Not on a 30-year fixed, which is the spine of the network’s programs. Extended terms and interest-only periods are available through select lenders, and ARM structures exist for investors who want them. Check the term on any replacement loan before you sign.
Will my on-time payment history guarantee an extension?
No. It helps, since lenders tend to favor borrowers who paid on time, but the extension is discretionary and usually carries a fee. Bring a finish plan and refinance evidence with the request.
What if my property has no tenant at maturity?
A DSCR refinance is harder, though some programs allow vacant properties with appraisal-supported market rent, depending on the lender. Otherwise the options are an extension, a bridge, or a sale.
Do consumer balloon rules protect my investment loan?
Generally not. Credit for non-owner-occupied rental property is treated as business purpose, so your note’s terms control. Tax treatment varies; consult a qualified professional before relying on any deduction.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Programs vary by lender, property, and experience, and nothing here is a commitment to lend.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. CFPB – What is a balloon payment?
3. Compliance Alliance – Reg Z and Investment Properties
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash-on-Cash vs DSCR for a High-Escrow County Rental · Hard Money Loan Requirements to Exit Seller Financing or Subject-to · Hard Money Overrun Documentation for a BRRRR Rehab Into a DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.