The Quick Read: Usually yes, but loan to cost is only one of two limits, because a hard money lender sizes a flip loan on the lower of a percentage of total project cost and a percentage of after-repair value, so whichever number is smaller sets the loan, and the rehab portion is typically released in draws rather than at closing. The cost cap is real, and it is tiered by experience. The value cap is the one that surprises people.
- Across Lendmire’s wholesale network, flip leverage typically runs 85%, 90%, or 93% of project cost, depending on how many projects you have completed.
- Every one of those tiers is capped at 75% of after-repair value.
- Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab figure, not a purchase figure.
- There is no true 100% purchase program, so you bring cash for the gap, closing costs, and reserves.
- All figures vary by lender, property, and experience, and nothing here is a commitment to lend.
What Loan to Cost Actually Measures
Loan to cost, or LTC, is the loan amount divided by the total cost of the project. On a flip, cost means the purchase price plus the renovation budget.
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.
Loan to value, or LTV, is a different yardstick. It divides the loan by what the property is worth.
Here is why the difference matters on a flip. The property you buy is worth less than the property you will sell. A lender looking only at today’s value would lend very little. A lender looking only at cost would ignore whether the finished house is worth that much. So most flip lenders use both yardsticks at once.
The Two Tests, and Why the Lower One Wins
A hard money loan is short-term, asset-backed financing from a private lender. Corporate Finance Institute describes it that way, and the asset is the point. The lender is lending against the house, the plan, and the exit.
That is why every flip loan faces two tests.
1. The cost test. Multiply total project cost by your tier percentage. This gives the cost-based maximum.
2. The value test. Multiply the after-repair value by the ARV cap. In Lendmire’s network, that cap is 75% on every flip tier.
The lender takes the smaller of the two results. Your cash in the deal is the gap between total cost and that loan. The gap pays for your down payment, closing costs, and reserves.
After-repair value, or ARV, is what the home should sell for once the work is finished. MasterClass explains that private and hard money lenders size loans off this number, and it comes from comparable sales. If your comps are thin or far away, the ARV is the number that will get challenged. Lendmire’s piece How a Hard Money Lender Treats Distant Comps on a First Flip covers that problem.
Why do lenders cap both ways? The cost cap makes you put your own money in, which lowers the chance you walk away from a bad project. The value cap protects the lender if the resale price falls short of the plan. Together, they keep the loan well inside the finished value.
Three Worked Deals: Cost Wins, ARV Wins, Appraisal Comes in Low
The table below uses index points, not dollars. Treat the purchase price as 100 and scale everything from there. All inputs are modeled assumptions, not market data. Each deal uses the 85% of project cost tier (fewer than two completed projects) and the 75% ARV cap.
| Line | Cost wins | ARV wins | Low appraisal |
|---|---|---|---|
| Purchase price | 100 | 100 | 100 |
| Rehab budget | 20 | 40 | 20 |
| Total project cost | 120 | 140 | 120 |
| Cost test (85%) | 102 | 119 | 102 |
| ARV used | 180 | 150 | 130 |
| Value test (75%) | 135 | 112.5 | 97.5 |
| Binding limit | Cost | ARV | ARV |
| Your cash, share of cost | 15% | 19.6% | 18.75% |
In the first deal, the finished value is large compared with the cost. The cost test is the smaller number, so the loan equals the tier percentage and you bring 15% of cost.
In the second deal, the rehab budget is big and the value lift is modest. The value test is lower than the cost test, so it governs. You bring close to 20% of cost, even though the advertised tier said 85%.
The third deal is the one nobody plans for. The same cheap rehab as deal one now looks risky, because the ARV came in far below the plan. The loan shrinks and your cash requirement jumps. A first-time flipper at the 85% tier can easily see a first loan below 85% of cost for exactly this reason.
The lesson is simple. Heavy rehab on a thin margin needs much more cash than the headline percentage suggests.
What Counts as Cost?
Purchase price and the rehab budget are the core. After that, practice varies. Flip programs differ from commercial construction on this point.
In practice, treat the items below as lender-dependent until a lender tells you otherwise.
- Usually counted: purchase price and the itemized, bid-supported rehab budget.
- Varies by lender: closing costs, interest reserves, and a contingency line.
- Never counted as extra equity: a discount you negotiated.
That last point trips up new flippers. If you buy a house well below market value, your cost basis is still the price you paid. The discount helps your profit and your ARV story. It does not shrink the cash the lender expects you to bring.
Wholesale assignment fees fall in the lender-specific bucket too. Some lenders fold them into cost and some do not. Ask before you build a budget around them.
How Rehab Money Actually Reaches You
Rehab money does not arrive at closing. It works in two pieces.
The acquisition portion funds like a normal purchase. The rehab portion sits in a holdback. The lender releases it in draws tied to inspected milestones, such as demolition done, rough-in done, or drywall done. Interest generally accrues only on money actually disbursed.
That structure has a cash-flow consequence. You pay contractors first and get reimbursed after the inspection. So you need working capital between draws, on top of your down payment. A project can look fully funded on paper and still stall because the investor ran out of liquid cash in week three.
Draw mechanics also differ across lenders in the network. Some inspect and pay by milestone with little friction. Others hold more tightly to the budget. Ask how draws are inspected and paid before you commit.
Why 100% Financing Does Not Mean Zero Down
You will see marketing that promises 100% financing. Read it as 100% of the rehab budget. It does not mean 100% of the purchase.
There is no true 100% purchase program in the network. The borrower still covers the gap between cost and the loan, plus closing costs and reserves. A lender covering close to all of your costs only does so when those costs sit well under the ARV cap. That is rare on a first deal.
One investor-side structure shows how this plays out. You put roughly 15% of the purchase price down, the lender funds 100% of the rehab, and the total stays under 75% of ARV. That is a strong setup, and it still needs real cash at closing.
How Your Experience Moves the Cap
Hard money underwriting is asset-focused, but it is not blind to the borrower. Credit, reserves, and track record shape both leverage and draw structure.
Across the network, leverage is tiered by documented completed projects. The tiers run like this.
| Completed projects | Leverage on a flip (of project cost) | ARV cap |
|---|---|---|
| Fewer than 2 | 85% | 75% |
| 2 or more | 90% | 75% |
| 5 or more | 93% | 75% |
These tiers vary by lender, property, and experience. The top tier is reserved for experienced investors. A minimum credit score of 620 applies, with added conditions below 660. First-time investors do qualify, but at the lower tiers.
Can you move up a tier? Yes, and the path is boring. Complete projects and document each one, with a purchase, a scope, a sale, and the closing paperwork. Show reserves. Bring a rehab budget backed by contractor bids, not round numbers. Lenders move leverage up for evidence, not for confidence.
Other Loan Types and Gap Funding
Not every hard money file is a flip with a rehab budget. The cap changes with the file type, and each cap is measured against something different.
- Bridge purchase without rehab: up to 80% of purchase price.
- Cash-out or rate and term refinance: up to 65% of value.
- Ground-up construction: up to 90% of cost and 75% of completed value at three or more completed projects.
Some investors add a junior loan to cover the cash gap left by the first loan. That can work, but it is stress-tested. The ARV cap still controls the first loan, and stacked debt makes a thin margin thinner. If the numbers only work when two loans stack at the limit, the deal has very little room for a surprise.
Loan sizes go up to $5,000,000 in the program, with larger by exception. Collateral is non-owner-occupied residential property of one to four units, and ground-up construction can go to ten units. Terms run six to eighteen months, interest-only, with no prepayment penalty.
A Stress Test Before You Make an Offer
Run two checks on every deal before you write the offer. Both take five minutes.
1. Find the binding limit. Add purchase and rehab for total cost. Multiply by your tier percentage. Then multiply your ARV by 75%. Whichever is smaller is the loan.
2. Shock the numbers. Drop the ARV by a realistic amount, then raise the rehab by a realistic amount. Run the loan again and note how your cash requirement moves.
If the deal only works at the best-case ARV, it is not a deal yet. A budget increase mid-project is the other quiet risk. When the rehab grows, the cost test grows with it. The value test does not. Overruns often come out of your own pocket.
Also confirm that your total cash covers four things: the down payment, closing costs, reserves, and the working capital for contractors between draws. Many investors only plan for the first.
The Exit: Flip It or Refinance It
The short, interest-only term suits a flip. It is also the reason some investors use hard money as a bridge instead. Many investors refinance out of hard money into long-term rental financing once the property is renovated and rented. Lendmire brokers that path through DSCR loans, which qualify primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide explains how that second step works.
One caution belongs here. Clearing a coverage ratio of 1.00 is not the same as positive cash flow, because repairs, vacancy, and management sit outside the calculation. Plan your exit with that in mind.
Key Terms Defined
Loan to cost (LTC): the loan amount divided by total project cost, meaning purchase price plus rehab budget.
Loan to value (LTV): the loan amount divided by what the property is worth.
After-repair value (ARV): the estimated sale price once renovation is finished, set from comparable sales.
Draw: a release of rehab funds from the holdback after the lender inspects completed work.
Holdback: the rehab portion of the loan the lender keeps in reserve instead of paying at closing.
Skin in the game: your own cash in the deal, not equity you gained by buying below value.
Frequently Asked Questions
Does every hard money lender cap loan to cost?
Nearly all of them size on cost in some form, and most also apply a value cap. Some quote only a percentage of ARV or of purchase price plus rehab. The format differs, but the lower-of-two logic is the common thread. Always ask which ratio the quote refers to, because LTC and LTV are not interchangeable.
Is 100% financing on a flip real?
Only for the rehab budget. In Lendmire’s network, up to 100% of the rehab can fund in draws against completed work. The purchase side is capped by tier, so you still bring cash for the gap, closing costs, and reserves. A program that covers all of your costs only does so when those costs sit under the ARV cap.
Which limit applies if the two tests disagree?
The lower one. If the cost test says one number and the ARV test says a smaller number, the smaller number is the loan. Heavy rehab on a thin value lift is where the ARV cap usually takes over.
Do closing costs and contingency count toward cost?
It varies by lender. Purchase price and the itemized rehab budget are the core. Closing costs, interest reserves, and contingency are treated differently from one lender to the next. Ask for the lender’s definition before you finalize your budget.
What happens if the appraisal comes in low?
The ARV cap shrinks the loan, and your cash requirement rises. The cost test does not rescue you, because the lender takes the smaller result. A stress test before the offer, using a lower ARV, shows how much extra cash that scenario would need.
Where to Go From Here
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. The brokerage arranges financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Terms and eligibility are subject to lender guidelines, and every file is underwritten individually.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage brokerage specializing in DSCR investor loans, helping arrange financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. The model centers on property-level rental income reviewed by the lender rather than W-2 documentation, subject to lender guidelines, suiting entity-owned and multi-property investors. Lendmire holds Scotsman Guide Top Mortgage Workplace recognition for 2025 and 2026.
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References
1. Corporate Finance Institute: Hard Money Loan
2. MasterClass
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Is a Hard Money Fix and Flip Loan Worth It for a Business Owner? · Can You Roll Closing Costs Into Hard Money on a Flip? · Should an Investor Choose a Hard Money Loan or a Flip 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.