The Quick Read: Usually yes on paper, but only in stages: hard money programs can fund up to 100% of an approved rehab budget, yet that money is held in a holdback and released in draws after completed work, and the whole loan stays under a cap tied to the property’s after-repair value. The rehab is covered, but you front the early work and get reimbursed. Plan your cash around that gap, not around the headline number.
- Up to 100% of the rehab budget can fund through draws, subject to lender guidelines and the scope of work the lender approves.
- Draws reimburse finished work, so the investor floats each phase first.
- Every leverage tier is capped at 75% of after-repair value (ARV), which can shrink rehab coverage on heavy-rehab deals.
- Rehab coverage is not purchase coverage. There is no true 100% purchase-and-rehab program in the network.
- Terms, leverage and fees vary by lender, property and investor experience, and nothing here is a commitment to lend.
Covered Is Not the Same as Paid When
A lender can agree to fund the whole rehab budget and still leave you short of cash on day one. Those are two separate questions. The first is how much of the budget the loan will cover. The second is when each dollar arrives.
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.
Most hard money files that Lendmire, a mortgage broker placing business-purpose loans through a wholesale network across 41 markets, including Washington, D.C., sees follow the same pattern. The lender funds the purchase side at closing. It holds the renovation money back. It releases that money in draws as inspected work is finished.
Hard money loans are short-term loans secured by the property and made by private or non-bank lenders. They are built around the asset and the plan, not around your traditional personal-income documentation. That is why the money follows the work.
Even government-backed rehab lending works this way. HUD’s 203(k) rehab loan holds renovation funds back and releases them after inspection and sign-off. Private draws follow the same logic under looser, contract-based rules.
This pattern is why the phrase “100% rehab financing” can mislead first-time flippers. It is accurate. It does not mean you put nothing in.
How the Loan Splits at Closing
At closing, the loan has two buckets. One is the acquisition advance, which pays the seller. The other is the holdback, which the lender keeps and pays out against the renovation.
Underwriting looks at two values. The first is the as-is value of the property today. The second is the ARV, which is what the property should be worth when the work is done. The lender sizes the loan to the project cost and then applies the ARV cap.
Here are the program figures that apply on the files we place. They vary by lender, property and investor experience.
- Fix-and-flip leverage is tiered by completed projects: up to 93% of project cost at five or more completed projects, up to 90% of project cost at two or more, and 85% of project cost below two.
- Every tier is capped at 75% of ARV.
- Up to 100% of the rehab budget funds in draws against completed work.
- Bridge purchases with no rehab run up to 80% of purchase price.
- Cash-out and rate-and-term refinances run up to 65% of value.
- Terms run 6 to 18 months, interest-only, with no prepayment penalty.
- The minimum credit score is 620, with extra conditions below 660.
- Loan sizes go up to $5,000,000, and larger by exception.
Notice what is missing: a 100% purchase program. The top tier is reserved for experienced investors, and even that tier asks for cash at the start.
Where the ARV Cap Bites
The ARV cap is the number that decides whether your rehab is truly covered. A loan sized on cost can look generous. The cap then trims it if the total would pass 75% of the finished value.
Loan-to-cost (LTC) compares the loan to the total project cost, which shows how much equity the borrower carries. Loan-to-value works from the property’s value instead. A flip loan has to pass both tests at once. The lower result wins.
Run the numbers this way. The table below is a modeled illustration for an investor on the 90%-of-cost tier. It is not a program offer. It shows how total project cost, as a share of ARV, changes the loan size and your equity.
| Total cost as % of ARV | Loan size (% of ARV) | Which test wins | Your equity (% of ARV) |
|---|---|---|---|
| 70% | 63% | Cost test | About 7% |
| 80% | 72% | Cost test | About 8% |
| 85% | 75% (capped) | ARV cap | About 10% |
| 90% | 75% (capped) | ARV cap | About 15% |
Closing costs, insurance and permits sit on top of the equity column.
The pattern is simple. On a deal with a healthy margin, the cost-based tier governs and the rehab fits. On a thin-margin deal, the cap governs, and the gap lands on you. A rehab that looks fully financed on the term sheet can turn into a cash call once the lender compares the total to ARV.
This is the main reason heavy rehabs are harder to fund. As the budget grows, the finished value has to carry a bigger loan. Some lenders also cap the rehab relative to the purchase price, so a purchase at a deep discount with a large scope draws closer scrutiny. Ask about that before you fall in love with a project.
How a Draw Works, Step by Step
A draw is a release of holdback money tied to finished, inspected work. The cycle is the same across most programs in the network, though fees and details differ.
1. Scope of work. You submit a line-item budget. The lender approves it against the target ARV.
2. Draw schedule. You and the lender agree on the number and size of draws before closing.
3. You fund the phase. You pay the contractor and suppliers from your own cash first.
4. Draw request. You send invoices, receipts, an updated schedule of values, any change orders, lien waivers and a progress summary.
5. Inspection. The lender, or its inspector, verifies that the work is done.
6. Release. The lender reimburses the approved amount, sometimes holding a portion back until completion.
7. Repeat. The cycle runs until the holdback is gone or the work is finished.
No regulator sets these rules. They come from your loan agreement, your rehab budget and the lender’s draw policy. That is why two lenders can look alike on paper and behave very differently in month three.
Some lenders charge interest only on funds already drawn. Others charge on the full loan from closing. It varies by lender, so ask.
Cash Exposure by Stage
Your cash is most at risk early, before the first reimbursement lands. The table shows the flow of a typical rehab. The stages are qualitative, and each lender sets its own details.
| Stage | What releases | Your cash at risk |
|---|---|---|
| Closing | Acquisition advance | Equity, closing costs, insurance |
| Phase one work | Nothing yet | Cost of the first phase |
| First draw approved | Reimbursement for phase one | Drops by the reimbursed amount |
| Middle phases | Draws after each inspection | Rises and falls with each phase |
| Final draw | Last reimbursement, any retained share | Contingency and carry |
| Sale or refinance | Payoff | Closed out |
Your peak exposure usually sits at the end of phase one. That is where deals stall. An investor with strong equity at closing can still run short of working cash before the first inspection clears.
What You Pay Before the First Draw
Budget for four things before any reimbursement arrives. Each one is easy to underestimate.
- Your equity. This is the gap between the loan and the total project cost, shaped by the leverage tier and the ARV cap.
- Closing costs. These include lender fees, title, insurance and permits.
- The first-phase float. Early work often includes demolition, structural fixes and permits, which are costly and are not reimbursed until inspection.
- Carry. Interest, taxes and utilities keep running between draws.
Fewer draws mean fewer inspection fees. They also mean more of your own money out per phase. Many investors choose around three draws per project as a balance. That is a judgment call, not a rule.
If your cash cannot survive the float, a bigger loan will not fix it. You need either a smaller scope, a partner or a lender with a draw structure that suits the work.
When the Budget Runs Over
Overruns are the most common way a covered rehab becomes a cash problem. The lender funds the approved budget, not whatever the project ends up costing.
If costs climb, three things happen. Change orders need lender approval and documentation. Any amount above the approved budget comes from your pocket. Delays push you toward the end of your term, which runs 6 to 18 months on this program.
Build a contingency into your own plan, separate from the lender’s budget. Keep it liquid. A lender that sees a realistic scope, with line items that match the comps behind the ARV, is more likely to approve the full budget. A vague or padded scope invites cuts.
Pre-application stress testing helps here. Price the work with two bids if you can. Check each line against what the finished property must be worth. If the ARV only works when everything goes right, the deal has no cushion.
First-Timers vs Experienced Flippers
Experience changes how much of the project the loan covers. It does not change the draw mechanics.
| Profile | Typical leverage tier | What to expect |
|---|---|---|
| Five or more completed projects | Up to 93% of project cost | Strongest tier, still capped at 75% of ARV |
| Two or more completed projects | Up to 90% of project cost | Strong tier, still capped at 75% of ARV |
| Fewer than two projects | 85% of project cost | More equity required, same draw process |
Each tier requires documented completed projects. First-time investors can qualify at the lower tiers, with underwriting that stays focused on the property, the plan and the exit. Credit still matters, with a 620 floor and extra conditions below 660, and everything varies by lender, property and experience.
If you have not flipped before, a smaller, simpler first project often works better than a big structural rehab. It builds the track record that unlocks the better tiers.
Where Draws Go Wrong
Most draw problems come from paperwork, timing or scope. Here are the usual failure points.
- Failed inspection. The work does not match the line item, or the lender’s inspector disagrees. The draw waits until you fix it.
- Lien issues. Missing lien waivers can hold up a release. Lien-release rules vary by state and lender, so collect releases from every contractor regardless.
- Slow turnaround. A late draw can stall a contractor. A stalled contractor adds carry.
- Scope drift. Work that moves away from the approved budget needs a change order before you spend.
- Contractor payment timing. If your contractor expects payment before your reimbursement, you carry the gap.
The fix for most of these is the same. Photograph progress, keep invoices organized and talk to the lender before a problem becomes a delay.
Questions to Ask a Lender Before You Sign
Ask these before you commit, and compare the answers against the loan agreement.
- Is an inspection required before every draw, and who performs it?
- Is there a per-draw fee or a fund-control fee?
- What is the usual turnaround on a draw request?
- Is any share of each draw retained until completion?
- Does interest accrue on the full loan or only on drawn funds?
- How are change orders approved and funded?
- Does the ARV cap apply to the total loan, and which appraisal sets it?
- What happens at the end of the term if the work runs long?
Key Terms Defined
After-repair value (ARV): the estimated market value of the property once the planned renovation is complete.
Loan-to-cost (LTC): the loan amount divided by total project cost, which shows how much equity the borrower carries.
Loan-to-value (LTV): the loan amount divided by the property’s value, which is the basis for the ARV cap.
Holdback: the part of the loan the lender keeps for rehab costs instead of paying out at closing.
Draw: a release of holdback money after the lender verifies completed work.
Retainage: a share of each draw the lender may keep until the work is finished and liens are cleared.
Hard money loan: a short-term, asset-based loan from a private or non-bank lender, often used as a bridge until a sale or refinance.
The Exit That Pays Off the Note
Hard money is short by design. Most investors exit by selling the finished property or by refinancing into longer-term financing. On a flip-to-hold or a BRRRR, many investors refinance into a long-term rental loan once the property is stabilized, and Lendmire brokers that path.
The math reverses at that point. Hard money is sized on project cost. Back into your rehab budget from the refinance, not from the contractor’s bid. Purchase, rehab, carry, fees and refinance closing costs all have to fit under the new ceiling if you want every dollar back.
DSCR compares rent to the full monthly obligation. Clearing the coverage test is not the same as positive cash flow, because repairs, vacancy and management sit outside the calculation. The complete DSCR loans guide covers qualification, leverage and documents.
Tax treatment varies by how funds are used and how the property is held, so consult a qualified professional.
Frequently Asked Questions
Does hard money cover the full rehab budget?
It can cover up to 100% of an approved rehab budget, but not always in full. Funding depends on the lender, your experience and the scope the lender approves. The total loan also stays under the 75% ARV cap, which can reduce coverage when the margin is thin.
Is the rehab money released at closing?
No. Closing funds the purchase side. The renovation money sits in a holdback and is released in draws after the lender verifies completed work. That is why you need cash to start the first phase.
Can I get 100% of the purchase and the rehab?
Not through this network. The top tier reaches up to 93% of project cost for experienced investors, and every tier is capped at 75% of ARV. Rehab can fund up to 100% through draws, but the purchase side always needs equity.
What if I go over budget?
You cover the overrun. The lender funds the approved budget, and change orders need approval and documentation. Keep a liquid contingency separate from the loan, since delays also stretch your carry within a 6 to 18 month term.
Do I pay interest on money I have not drawn yet?
It depends on the lender. Some charge interest only on funds drawn, while others charge on the full loan from closing. Ask before you sign, because it changes your carrying cost on a long rehab.
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. Reach the team at 828-256-2183 or request a quote.
For the step-by-step draw cycle in more detail, read Lendmire’s explainer How Rehab Draw Releases Work on a Hard Money Fix-and-Flip.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s traditional personal-income documentation, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Corporate Finance Institute: Hard Money Loan
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Hard Money Lender Sizes an Interest-Only Fix and Flip Loan · How Much a Hard Money Lender Will Lend on a Fix-and-Flip · Hard Money Fix and Flip Seasoning Rules for a Quick Resale
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.