The Quick Read: No, cost alone is the wrong test, because the headline price of a flip loan is only one piece of what the project actually costs you, and a cheap quote that stalls on draws or changes terms late can erase the savings and then some. Compare these items side by side before you pick:
- Points, fees and extension charges, not just the interest quote.
- How much of the purchase and the rehab the loan actually funds.
- How draws are paid, inspected and reimbursed.
- Whether the lender has a record of closing what it quotes.
- The exit, whether that is a sale or a refinance into a rental loan.
Hard money is short-term, property-secured, non-bank financing. Corporate Finance Institute describes it as secured by the property, short in term and higher in cost than bank debt. Because the loan is short, the quoted price is spread over only a few months. That changes which line items matter most.
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.
Lendmire is a mortgage broker. It arranges these loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. Nothing here is a commitment to lend, and every file is reviewed individually.
Why Does Cost Look Like the Obvious Tiebreaker?
Cost looks like the tiebreaker because it is the one number every quote has in common. Two lenders send two term sheets, one number is smaller, and the choice seems made. The trouble is that the numbers are rarely built the same way.
One lender may fund a bigger share of the purchase. Another may include the full rehab budget while a third holds it back differently. One charges for extensions and one doesn’t. A low interest quote with thin leverage can leave you writing a bigger check at closing. That check has a cost too, because it is cash you can’t put into the rehab or the next deal.
Experienced flippers tend to say the same thing: ask what you need first, price second. A lender that wants more cash down may price lower because it carries less risk. An investor who wants the highest leverage may rationally accept a higher price for it. Neither is wrong. They are solving for different things.
What Does “Total Cost” Actually Include?
Total cost is every dollar that leaves your pocket between closing and payoff, plus the dollars the project loses to delay. On a flip, that is more than interest.
Here are the pieces:
1. Points. A point is 1% of the loan, paid at closing. The CFPB explains points this way and frames the choice as a break-even question: how long you hold the loan decides whether an upfront charge pays off. A flip is short, so a point is a real, one-time hit that never gets spread over years.
2. Interest. Flip loans are interest-only with the full balance due at the end. Interest accrues only for as long as the project runs, so a stalled rehab costs more than a lower price saves.
3. Lender and broker fees. Origination, processing and any layer a middleman adds. Ask who is actually funding the loan and who is being paid.
4. Extension charges. If the rehab runs long, the extension is priced separately. Ask before you sign, not after.
5. Draw costs. Inspection fees, wire fees, and the carrying cost of waiting for reimbursement.
6. Prepayment terms. On the network’s current program there is no prepayment penalty. Some lenders in the wider market charge one, so confirm it in writing.
7. Delay cost. Each extra month holds your capital, adds interest, and pushes the sale or refinance back.
On a flip this short, points and structure often outweigh the rate itself. That is the reason a rate-only comparison misleads.
How Does a Flip Loan Get Sized?
Flip loans are sized on the deal, not on your pay stubs. The lender looks at the purchase price, the rehab budget and the after-repair value, known as ARV. Underwriting is asset-based: the property, the plan and the exit, along with your track record.
Across the wholesale network, the leverage tiers depend on how many projects you have completed. Typical ranges, varying by lender, property and experience:
| Experience | Fix-and-flip leverage | Cap |
|---|---|---|
| Fewer than 2 completed projects | About 85% of project cost | 75% of ARV |
| 2+ completed projects | About 90% of project cost | 75% of ARV |
| 5+ completed projects | About 93% of project cost | 75% of ARV |
Up to 100% of the rehab budget is funded in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value. There is no true 100% purchase program. The top tier is for experienced investors, and the 75% of ARV cap applies to every tier.
Bridge purchases without a rehab can run up to 80% of the purchase price. Cash-out and rate-and-term refinances on hard money run up to 65% of value. Loan amounts go up to $5,000,000, with larger sizes by exception. Terms are 6 to 18 months, interest-only. Credit minimums start at 620 with added conditions below 660, and first-time investors qualify at the lower leverage tiers.
Property type matters too. The collateral is non-owner-occupied residential, one to four units, and ground-up construction goes to ten units. Commercial, land and owner-occupied properties are not on the sheet. A real estate planning newsletter notes that hard money lenders generally make non-owner-occupant loans, which makes the product a poor fit for a live-in flip.
Draws Are Where Cheap Quotes Get Expensive
The rehab money is not in your hands at closing. It sits in a holdback, and you are reimbursed after the work is completed and inspected. So you pay the contractor first and wait.
That wait is a cost. If the lender inspects slowly or pays draws on a long cycle, you need bridge cash or a contractor willing to float the work. A crew that doesn’t get paid on time slows down or leaves. A slow crew means more months of interest.
Three draw questions separate good lenders from bad ones:
1. How is a draw requested, and who inspects?
2. What is the usual gap between inspection and payment?
3. Does interest accrue on the full holdback or only on funds already advanced?
The third question matters more than most first-timers expect. Interest charged on money you haven’t received is a quiet addition to carry cost. Get the answer in the term sheet.
Worked Comparison: Cheaper-but-Slower vs Pricier-but-Reliable
Run the numbers this way, using modeled assumptions and no sourced figures. Two lenders quote the same flip. Lender A has the lower interest quote but a slow draw cycle and charges for extensions. Lender B quotes higher but pays draws on a predictable schedule and includes more of the rehab in the loan.
On paper, A wins. In the file, the picture changes:
- A slow draw cycle stretches the rehab by a month or two.
- Each added month adds interest and holding costs, such as utilities, insurance and taxes.
- If the loan reaches maturity, an extension fee and possibly a changed price follow.
- The sale lands later, so the market you priced against may have moved.
The point isn’t that A is always worse. If the rehab is light, the hold is short, and the lender has a clean record, A’s lower price may be the right call. The method is what counts: estimate the realistic timeline, add every fee and every month of carry, and compare projected total dollars at payoff. Compare that figure, not the headline.
When two lenders sit far apart on price, or the hold will run long, the quoted price does become the deciding factor. A short flip absorbs a high price as a one-time cost recovered at sale. A long hold wears it out month after month.
Execution Risk: The Cost Nobody Prices
Reliability is hard to quote and easy to feel. Investors who compare lenders in public forums describe the same problems: terms that move late, and draw dates that are promised and then missed. One lender replying in those discussions says price shouldn’t be the main focus unless the offers are far apart or the hold will be long.
The practical lesson is that a lender’s quote only counts if it survives to the closing table. The term sheet is the document that fixes the loan amount, price, points, fees and conditions. Get it in writing, compare it line by line, and treat verbal promises as nothing.
One caution on brokers. A broker can add a layer of fees on top of the lender’s own, and some quotes that look low get rebuilt once points and an application fee are stacked on. Ask who funds the loan and what each party is paid. That applies to any intermediary, including a brokerage like Lendmire: ask for the full fee picture early and compare it against any direct quote you have in hand.
When Should Cost Win, and When Shouldn’t It?
Cost wins when the other variables are close. If two lenders offer similar leverage, similar draw practices and a similar record, the cheaper one is the better choice. Cost also gets more weight on a thin-margin flip, where a point or two decides whether the deal clears your target.
Cost should lose when:
- The rehab is heavy. More draws mean more exposure to a slow lender.
- The timeline is tight. A missed date costs more than a lower price saves.
- You are a first-time flipper. You are more likely to run over schedule, so extension terms and draw practices matter more. You also qualify at lower leverage tiers, so cash at closing matters more.
- The exit is a refinance. If you plan to hold the property as a rental, a stalled flip loan can wreck the exit.
An experienced flipper with a reliable crew and a short, cosmetic rehab can reasonably shop on price. A first-timer with a structural rehab shouldn’t.
The Exit Is Part of the Cost
Many flips end in a sale. Some end in a rental. If you plan to keep the property, the flip loan is only step one. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire arranges that path through its network. DSCR files need a rent-ready property, so a lender that delays the rehab delays the refinance too.
That is why the exit belongs in the comparison. If you will refinance, the project has to finish on schedule, lease up, and then clear the rental loan’s own tests: coverage, credit, reserves and property eligibility. Our complete DSCR loans guide covers how those tests work. A cheap flip loan that leaves you with an unfinished property and no exit is the most expensive kind.
On the other side, a first flip often turns on how the lender values the property in the first place. Lendmire’s piece How a Hard Money Lender Treats Distant Comps on a First Flip covers that valuation question, which can change the loan amount more than any price difference.
Questions to Ask, and How to Read the Answers
Ask each lender the same questions and write down the answers:
1. Is the quote firm or conditional? A firm answer names the conditions. A vague answer is a warning.
2. What is every fee, in writing? Good lenders itemize. Weak ones say it depends.
3. How are draws paid and how often? Good answers name an inspector, a process and a usual gap.
4. What happens at maturity? You want a stated extension cost, not “we’ll work it out.”
5. Who funds the loan? A direct lender and a broker place different layers of fees.
6. Can the terms change before closing? Late repricing is a documented complaint. A lender who is sure of its quote will say so.
Key Terms Defined
ARV (after-repair value): The estimated value of the property once the rehab is finished.
Holdback: Rehab funds the lender keeps and releases in draws as work is completed.
Draw: A payment of rehab money released after the lender confirms the work is done.
Loan-to-cost: The loan amount as a share of the total project cost, including purchase and rehab.
Balloon payment: The full remaining balance due when a short-term, interest-only loan matures.
Frequently Asked Questions
Is the lowest quote the best choice for a flip?
Not by default. The lowest quote can come with thinner leverage, a slower draw process, or extension and fee charges that appear later. Compare total projected dollars over a realistic timeline. If two offers are otherwise equal, the cheaper one wins.
Do points matter more than interest on a short flip?
Often, yes. Interest accrues only for the months you hold the loan, but points are paid in full at closing. On a short project, a point is a fixed cost that doesn’t shrink with a quick sale. Weigh both together, not either alone.
What if I finish the flip early?
On the network’s current program there is no prepayment penalty, and terms run 6 to 18 months, interest-only. Terms vary by lender, property and experience, so confirm payoff terms in the written term sheet before you sign.
Can a first-time flipper get hard money?
Yes, at the lower leverage tiers. Fewer than two completed projects typically means about 85% of project cost, capped at 75% of ARV, with a 620 credit minimum and added conditions below 660. Underwriting stays asset-based, looking at the property, the plan and the exit.
How many lenders should I compare?
Two or three itemized term sheets is enough to see real differences without stalling the deal. Ask each for the same fee list, the same draw details and the same extension terms so the comparison is fair.
Can I use hard money for a flip where I plan to live?
Generally no. These loans are business-purpose and made on non-owner-occupied property. A live-in flip needs a different product.
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. Call 828-256-2183 or request a quote. Tax treatment varies; consult a qualified professional.
A more affordable flip loan is the one you’ll still be glad you took after the last draw is paid and the property is sold.
About Lendmire
Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.
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References
1. Corporate Finance Institute: Hard Money Loan
2. CFPB
3. Real Estate Financial Planner
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money Loan Requirements to Buy Out a Land Contract · DSCR Loan Concentration Risk for a Portfolio With One Lender · Can You Use a Hard Money Loan to Buy Out Siblings or a Partner?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.