The Quick Read: When you pay for the rehab yourself, the lender funds only the acquisition, so the loan is sized as a percentage of purchase price, up to 80% on a non-rehab bridge purchase through select lenders in Lendmire’s wholesale network, and every rehab dollar, fee, and reserve comes from your own cash on top of the down payment.
- The loan is the lesser of what the purchase price allows and what the appraised as-is value allows. It is not a percentage of total project cost.
- Your closing cash is the down payment plus closing costs. Your total cash is that plus the full rehab budget, interest carry, and reserves.
- Paying the rehab in cash gives up the draw feature, but it also removes holdback interest and inspection delays.
- A later DSCR cash-out refinance credits only spending you can document, so every cash dollar needs a paper trail.
Everything below varies by lender, property, and experience. Nothing here is a commitment to lend.
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.
Key Terms Defined
Hard money loan: a short-term, interest-only, business-purpose loan secured by the property. Underwriting focuses on the asset, the plan, and the exit.
Purchase price: the number on your signed contract. It is the starting point for sizing when no rehab is financed.
As-is value: what the property appraises for today, before any work.
After-repair value (ARV): the projected value once the rehab is finished.
Loan-to-value (LTV): the loan divided by a value, either as-is or ARV.
Loan-to-cost (LTC): the loan divided by total project cost, meaning purchase plus rehab.
Holdback and draws: in a rehab-inclusive loan, the lender sets the rehab money aside and releases it in stages after verified work.
Bridge purchase: a loan that funds the acquisition only, with no rehab money inside it. This is the structure you are sizing.
Cost basis: what you can prove you put into the property. It matters when you exit.
What Does Paying Rehab in Cash Do to the Loan?
It turns a rehab-inclusive loan into an acquisition-only loan. In a standard fix-and-flip structure, the loan splits at closing into an acquisition advance and a rehab holdback. The holdback is released as work is completed and verified.
If you pay the rehab from your own funds, there is no holdback. The lender is financing one thing: the purchase.
That changes the sizing math in three ways:
1. The yardstick changes. Instead of a percentage of project cost, the loan is a percentage of purchase price. Across the network, bridge purchases without rehab reach up to 80% of purchase price.
2. The experience tiers matter less. The top fix-and-flip leverage tiers are reserved for experienced investors with documented completed projects. A purchase-only loan does not lean on them in the same way.
3. Your cash goes up. You fund the gap between the loan and the price, plus all the work, out of pocket.
Market surveys report averages of about 65% loan-to-value and about 75% loan-to-cost, according to Scotsman Guide. That is a market-wide average. The network figure for a bridge purchase of a non-owner-occupied 1-4 unit property is up to 80% of purchase price. Programs, lenders, and borrower profiles move those numbers, and loan amounts run up to $5,000,000, larger by exception.
The Sizing Rule: Which Test Sets Your Loan?
The loan is the smaller of two tests. Whichever test produces the lower number governs.
- Test one, price: the advance percentage times your contract price.
- Test two, value: the lender’s cap times the appraised as-is value.
Scotsman Guide reports that hard money lenders do not finance the whole project and lend against the lower of as-is value or contract price. You should plan the same way. If the appraisal lands under your contract, expect the loan to shrink with it.
| Test | What it measures | When it governs |
|---|---|---|
| Purchase price | Up to 80% of contract price | Most cash-rehab deals |
| As-is value | Lender cap on appraisal | Appraisal under contract price |
| ARV cap | 75% of finished value | Only if price nears finished value |
| Experience tier | Cost-based leverage level | Rehab-inclusive loans, rarely here |
The ARV cap is the one that surprises people. On a rehab-inclusive loan, every tier is capped at 75% of after-repair value. On a purchase-only loan, it rarely binds, because a flip worth doing is bought well under finished value. It bites only when you overpay.
Still, expect the lender to ask for comps and your plan. Even with no money inside the loan for the work, they want to see a property that can be sold or refinanced.
Step by Step: How to Size the Loan
Follow these steps with your own numbers.
1. Start with the contract price. Use the signed number, not a number you hope to negotiate.
2. Apply the advance percentage. On a bridge purchase, the network ceiling is up to 80% of purchase price. Many lenders sit below it depending on property and experience.
3. Check the as-is value. If the appraisal comes in under the price, run the same percentage on the lower figure.
4. Take the lesser of the two. That is your loan.
5. Subtract the loan from the price. The difference is your down payment.
6. Add closing costs and lender fees. These are set per file, so get them in writing early.
7. Add the full rehab budget. In a cash structure, all of it comes from your funds, on your schedule.
8. Add interest carry and reserves. Interest runs on the loan balance for the hold, and reserves are set by lender.
9. Add a cushion for overruns. Rehab budgets rarely land exactly on target.
10. Total it. That sum is what you need in verified funds, not just the down payment.
Here is the part most people skip. The loan sizing takes five minutes. The cash plan takes the rest of the afternoon.
Worked Examples (in Percent of Purchase Price)
These are modeled assumptions, not market data. They are shown as percentages of purchase price so the logic travels to any deal.
Example one: a clean cosmetic flip. The appraisal matches the contract. The loan is 80% of price, so you bring 20% down. Say your rehab budget is 25% of price. Your cash in the deal at closing and through the work is 45% of price, before closing costs, carry, and reserves. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Example two: the appraisal comes in light. The contract price is the same, but the as-is value appraises 5% under it. The lender runs its advance on the lower figure. Your loan shrinks, your down payment grows, and the rehab budget does not change. Nothing in the loan absorbs the shortfall, so it lands in your cash stack.
Example three: the overrun. Same as example one, but the rehab runs 20% over budget. A 25% rehab becomes 30% of price. Your cash in the deal moves from 45% to 50% of price. The loan stays put, so the overrun is entirely yours.
The pattern: the loan is stable and your cash absorbs every surprise. That is the real tradeoff of paying rehab in cash.
The Total Cash Stack
Closing cash is not total cash. Investors who size only the down payment get squeezed at month three.
| Cash line | When you pay it | Who sets it |
|---|---|---|
| Down payment | At closing | Advance percentage |
| Closing costs and fees | At closing | Lender and title |
| Rehab budget | During the work | You and your contractor |
| Interest carry | Through the hold | Loan balance and term |
| Reserves | Held after closing | Lender, varies by file |
| Overrun cushion | As needed | Your own plan |
Terms on the current program run 6-18 months, interest-only, with no prepayment penalty. Interest-only means you carry the cost of the loan balance, and the balance does not drop. Some lenders also fund interest reserves from proceeds, as Scotsman Guide notes, but you should not count on it.
Tax treatment varies; consult a qualified professional.
How the Lender Treats Your Rehab Cash
Lenders treat rehab cash as your risk, not theirs. Most files involve a few requests:
- Proof of funds. Expect to show that the down payment, closing costs, and rehab money exist. The rehab money is usually verified, not held. Get a proof-of-funds letter before you go under contract.
- A scope and budget. The scope matters mainly for the appraiser, since your rehab is outside the loan.
- Comps. They support the as-is value and the exit.
- Contractor bids. They show the budget is real.
- Entity documents. If you buy through an LLC, that is handled subject to lender program eligibility.
Credit still matters, though underwriting stays asset-based. A 620 minimum score is common on the program, with additional conditions below 660. First-time investors can qualify at the lower leverage tiers, and the top tiers reward experience.
Cash rehab also changes your cost basis. A DSCR lender at your exit credits only spending you can prove. So keep five documents: the original budget, the revised budget, change orders, a variance log, and proof of payment for every cash dollar. Unrecorded payments may not count.
Cash Rehab or Loan-Funded Rehab?
The same deal can run two ways. Neither is right for everyone.
| Factor | Cash rehab (purchase-only) | Rehab-inclusive loan |
|---|---|---|
| Loan sizing | Up to 80% of purchase price | 85%, 90% or 93% of project cost |
| Value cap | As-is value test | 75% of ARV on every tier |
| Rehab money | Your funds, on your schedule | Up to 100% of budget, in draws |
| Draw process | None | Inspections and verified work |
| Cash at closing | Higher | Lower |
| Overrun risk | All yours | All yours, but draws may be limited |
Rehab-inclusive tiers run 93% of project cost at 5+ completed projects, 90% at 2+, and 85% with fewer than 2. Each tier is capped at 75% of after-repair value.
The phrase 100% financing causes confusion here. It usually means 100% of the rehab budget, released in draws after the work, not 100% of the purchase. Nav explains that draws are released as phases are completed and verified by an inspector. There is no true 100% purchase program. The lender still limits its own risk.
For a deeper side-by-side, see Lendmire’s piece Hard Money vs DSCR Cash-Out Leverage When Rehab Is Paid in Cash.
Where the Rule Breaks
The general rule is lesser-of, price-based, cash-funded. These edge cases bend it.
Light cosmetic rehab. The purchase-price test governs almost entirely. The value cap barely matters.
Lenders that fund the first phase. A few lenders release first-phase money up front, but that is the exception. Some also charge interest on the full holdback from day one, and others only on funds disbursed. That affects total cost, not purchase sizing.
Lenders tighten when markets stress. Scotsman Guide reports lenders cutting leverage caps and adding payment reserves after the pandemic began. Caps are not fixed. Ask what a lender does if its guidelines move before closing.
True hard money versus fix-and-flip loans. Scotsman Guide separates the two. True hard money is almost exclusively asset-focused. Fix-and-flip loans look at both the asset and the borrower, and the trade press describes their terms as 12 to 18 months. The program you pick changes how experience is weighed.
Ineligible collateral. The program covers non-owner-occupied residential property of 1-4 units. Commercial, industrial, land, hospitality, and owner-occupied property are not on the sheet. Manufactured homes, log homes, and barndominiums are not offered.
Government rehab products. FHA 203(k) and similar renovation loans are built for owner-occupants. They are a different tool for a different borrower.
Common Sizing Mistakes
- Mixing up LTV and LTC. One measures value, the other measures cost. A cost-based tier cannot be applied to a purchase-only loan.
- Sizing only the down payment. Rehab, carry, and reserves are part of the cash you need.
- Trusting an optimistic ARV. On a cash-rehab deal, ARV mostly drives your exit, not your loan. An inflated number misleads your whole plan.
- Forgetting fees. Closing costs and lender fees come out of your funds, not the loan.
- Skipping the receipts. Cash rehab with no paper trail can disappear from your cost basis.
- Pricing at the ceiling. If the deal works only at maximum leverage and zero overrun, it does not work.
When Cash Rehab Is the Right Call
Paying cash makes sense when the work is modest, you have verified liquidity, and you want to avoid holdback interest, draw fees, and inspection delays. It also suits borrowers who have not yet reached the higher experience tiers and would get a lower rehab-inclusive tier anyway.
It makes less sense when the rehab is heavy and your cash would be stretched thin. In that case a rehab-inclusive loan keeps more liquidity in reserve, even with the draw process.
The exit shapes the decision too. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. DSCR compares rent to the full payment of principal, interest, taxes, insurance, and any dues. It does not measure cash flow, because repairs, vacancy, and management sit outside the ratio.
On a DSCR cash-out, the ceiling is typically around 75% of value on standard rentals, with about six months of seasoning a common expectation. Inside that window, many files size off documented cost basis using the lower of appraised value or cost. Cash spent without receipts may not count. Work backward from a conservative ARV, the cash-out cap, and every non-rehab cost, then leave a cushion. For the full picture, see the complete DSCR loans guide, and for sizing the purchase so the later refinance clears the note, see Lendmire’s piece How to Size a Hard Money Purchase So the DSCR Cash-Out Clears the Note.
Frequently Asked Questions
How much of the purchase price will a hard money lender fund when I pay the rehab in cash?
Up to 80% of purchase price on a bridge purchase through select lenders in the network, depending on lender, property, and experience. You fund the remainder, plus closing costs. Market-wide averages run lower, so expect some lenders to land below that ceiling.
Does the loan ever exceed the purchase price?
Not on a purchase-only loan. The advance is a percentage of price, so it sits below it. A rehab-inclusive loan can total more than the price, because it adds a rehab holdback released in draws.
Does ARV still matter if I fund the rehab myself?
It matters for your exit more than for the loan. The 75% ARV cap applies to rehab-inclusive tiers, and it rarely binds on a purchase-only loan unless you overpay. Lenders still want comps and a plan.
How much cash do I need beyond the down payment?
Plan for closing costs, the full rehab budget, interest carry through the hold, reserves, and an overrun cushion. Reserve requirements vary by lender and file. Get a proof-of-funds letter before you make offers.
Will my later DSCR refinance credit the cash I spent on rehab?
Only what you can document. Keep the budget, change orders, a variance log, and proof of every payment. Qualification runs primarily on property-level rental income covering the payment, subject to lender guidelines.
Next Step
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. Lendmire is a broker arranging financing through select lenders across 41 markets, including Washington, D.C. Any calculator on the site gives an illustrative estimate only.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Scotsman Guide, Hard Money, Soft Landing
2. Scotsman Guide, The Hard Money Space Has Adapted
3. Nav, Hard Money Loans and 100% Financing
4. Scotsman Guide, Stop the Confusion for Investor Clients
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Use Hard Money to Buy and Rehab a Duplex? · Can an Investor Get a Hard Money Loan Without Verifying Income? · Is a Bridge Loan Different From Hard Money for Investors?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.