The Quick Read: These are short-term, interest-only loans that fund both the purchase and the renovation of a rental-grade property you plan to resell. The lender sizes the loan on your project cost and the after-repair value (ARV, the expected resale value once the work is done), then releases rehab money in draws as work gets finished. Across the wholesale network Lendmire works with, leverage typically runs 85% to 93% of project cost, always capped at 75% of ARV. Exact terms vary by lender, property, and experience.
Key Takeaways
- The loan is sized on the deal: purchase price, rehab budget, and projected resale value. Your credit and track record adjust the terms, but they are not the main event.
- Two tests set the maximum loan, a loan-to-cost test and an ARV cap. The lower number wins.
- Rehab money does not arrive at closing. It comes in draws after completed, inspected work.
- Terms run 6 to 18 months, interest-only, with no prepayment penalty. There are no multi-year options on the current program.
- There is no true 100% purchase program. Up to 100% of the rehab budget can fund in draws, which is a different thing.
- Plan your exit before you close. Selling and refinancing into a rental loan are two different underwriting events.
What Is a Fix-and-Flip Hard Money Loan?
A fix-and-flip hard money loan is a short-term, asset-based business loan for buying and renovating a non-owner-occupied property with the plan to resell it. The property is the collateral. The renovation plan and the exit are the underwriting story.
What this loan actually costs to carry in your market.
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.
Two terms get mixed up, so here is the split. A “true” hard money loan looks almost only at the asset. A fix-and-flip loan looks at the asset and the borrower. Scotsman Guide draws the same line: both are private-capital loans for investment property, but the fix-and-flip version carries more underwriting. In practice, most programs we place files with behave like the second kind. They want to see your plan, your budget, your credit, and your experience level.
Collateral matters here. The program covers non-owner-occupied residential property of 1 to 4 units, and ground-up construction up to 10 units. Commercial, industrial, land or lots, hospitality, and owner-occupied properties are not offered. Availability also varies by state, so confirm yours early.
Loan sizes run up to $5,000,000, with larger loans by exception. Smaller balances vary by lender.
How Underwriting Treats the Deal, Step by Step
Underwriting a flip loan means checking four things: what the property is worth now, what it will be worth finished, whether the budget is believable, and whether you can exit. Here is the sequence.
Step 1: Two valuations, not one
A conventional purchase loan looks at today’s value. A flip loan looks at two: the as-is value and the ARV. The ARV usually comes from an appraisal or an opinion built from renovated comparable sales.
Sequencing matters. Scotsman Guide points out that if the scope of work does not reach the appraiser before the visit, the appraiser may set a weak ARV. Send the renovation plan with the appraisal order, not after.
Step 2: Two leverage tests, and the lower one wins
The lender runs two caps. One is a percentage of total project cost (purchase plus rehab), called loan-to-cost. The other is a percentage of ARV. The loan can’t exceed either.
On the program we broker, the cost test is tiered by documented completed projects:
- 93% of project cost at 5+ completed projects.
- 90% of project cost at 2+ completed projects.
- 85% of project cost with fewer than 2.
Every tier is capped at 75% of ARV. The top tier is reserved for experienced investors. All of these figures vary by lender, property, and experience.
Step 3: The borrower check
Underwriting stays asset-based, meaning the property, the plan, and the exit drive the decision. Credit still matters. The minimum score is 620, with additional conditions below 660. First-time investors qualify at the lower leverage tiers, and experience is what unlocks the upper ones.
Expect to provide:
- The purchase contract.
- A line-item scope of work and renovation budget.
- Entity documents if you close in an LLC, subject to lender program eligibility.
- Proof of the cash you are putting in.
- Your experience history, if you are claiming a higher tier.
Step 4: Rehab funds go into holdback
Renovation money does not land in your account at closing. The lender holds the rehab portion and releases it in draws. Each draw is tied to a milestone and verified, often by inspection and lien waivers. Up to 100% of the rehab budget can fund this way against completed work.
Notice what that means. You pay the contractor first and get reimbursed after. Your working capital has to cover that gap. This is the mechanic first-time flippers misjudge most often.
A Worked Example (In Index Units, Not Dollars)
Two tests, one answer. Run the numbers on a flip where total project cost is 100 units and the ARV is 120 units. These are modeled assumptions, not market data.
- Loan-to-cost at 85%: 85 units.
- ARV cap at 75% of 120: 90 units.
The cost test is lower, so it binds. The maximum loan is 85 units.
Now give that same investor the 93% tier. Cost test: 93 units. ARV cap: still 90. Now the ARV cap binds, and the loan stops at 90 units. The extra experience didn’t buy the full 93.
Change the ARV to 115 and the cap drops to 86.25 units. Same cost, same investor, smaller loan. This is why your resale number matters as much as your purchase number. A loan officer can’t fix a weak ARV, and an inflated one tends to get found.
Structures and Variations
The same lender network offers more than one flip-adjacent structure. Here is how they compare.
| Structure | Typical ceiling | Key detail |
|---|---|---|
| Fix-and-flip, 5+ projects | 93% of project cost | Capped at 75% of ARV |
| Fix-and-flip, 2+ projects | 90% of project cost | Capped at 75% of ARV |
| Fix-and-flip, under 2 projects | 85% of project cost | Capped at 75% of ARV |
| Bridge, no rehab | Up to 80% of purchase price | For purchases without a renovation |
| Cash-out or rate/term refinance | Up to 65% of value | Existing property, not a new flip |
| Ground-up construction | Up to 90% of cost, 75% of completed value | At 3+ completed projects |
Every ceiling varies by lender, property, and experience. Treat the table as a map, not a quote.
A few structural facts hold across all of them. Terms run 6 to 18 months. Payments are interest-only. There is no prepayment penalty, so selling early costs you no penalty. Nothing offers a multi-year runway. If you need longer, you refinance into long-term rental financing, which we cover below.
Where the General Rule Breaks
The rules above hold for most deals. These edge cases are where flips get surprised.
The “100% financing” claim. There is no true 100% purchase program. What exists is up to 100% of the rehab budget funding in draws against finished work. Your purchase still needs real equity, and the cost tiers top out at 93%. If an advertisement implies otherwise, ask what the loan-to-cost and the ARV cap actually are.
Interest on undrawn funds. How a lender charges interest on rehab money you haven’t drawn is not standardized. Many charge only on funds disbursed. Some charge on the full committed amount from day one. Ask each lender directly, because it changes your carrying-cost math.
Business-purpose status isn’t automatic. Hard money loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The CFPB’s Regulation Z text turns on whether the loan is primarily for a business purpose. So the facts have to fit. Plan to occupy the property, or close in your own name when the file calls for an entity, and the classification can be questioned.
The FHA resale rule. This one governs your exit, not your loan. When the buyer on your resale uses FHA financing, HUD’s flipping rule restricts FHA insurance on resales that happen soon after your acquisition, and resales that follow a bit later can draw extra documentation requirements. The exact waiting periods and conditions are set out in the rule, so confirm them against the current text. If your target buyer pool is FHA-heavy, your timeline just got a hard edge.
Flip approval isn’t rental approval. A completed flip that pencilled under ARV-based terms still has to qualify on its own if you refinance it into a rental loan. That loan looks at rent coverage, not ARV. We return to this below.
Hard money isn’t one thing. Pure asset-only lenders often run lower leverage than fully underwritten flip programs, because the lighter underwriting means more risk. Compare like with like.
What the Decision Looks Like in Practice
The decision comes down to cash, margin, and exit. Walk through them in that order.
Cash. Count your down payment, closing costs, carrying costs, and the working-capital gap between paying contractors and receiving draws. Draws arrive after inspection, so a project with no cushion stalls mid-rehab. That gets expensive.
Margin. Financing approval and profit are separate questions. ATTOM reports that flips made up 8 percent of home sales in the latest first quarter it covers, with typical profit margins near 25.4 percent. That margin has to absorb interest, fees, repairs, and selling costs. A tight deal can fail even with 93% financing.
Experience tier. If you are new, expect the 85% tier. Our guide for first-time flippers walks through how newer investors build a file that clears underwriting. Each completed project can move you up a tier on later deals.
Exit. With a 6 to 18 month term, you need a plan that doesn’t depend on hope. There are two exits:
1. Sell. Prepare for buyer financing quirks, like the FHA window above.
2. Hold and refinance. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized. DSCR (debt service coverage ratio) compares the rent to the full monthly housing obligation. Clearing it is not the same as positive cash flow, because repairs, vacancy, and management sit outside the calculation. Our complete DSCR loans guide explains how the ratio works. The BRRRR strategy (buy, rehab, rent, refinance, repeat) lays out the steps for refinancing out of a hard money loan.
Pick your exit before you close, because the rental refinance has its own seasoning and rent-documentation requirements. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Key Terms Defined
ARV (after-repair value): The estimated resale value of the property once renovations are complete.
Loan-to-cost (LTC): The loan amount as a percentage of purchase price plus rehab budget.
Draw: A scheduled release of rehab funds after a milestone of work is completed and verified.
Holdback: The portion of the loan the lender keeps in escrow until draws are approved.
Scope of work: The line-item plan and budget for the renovation.
Interest-only: A payment structure where you pay interest during the term and repay principal at payoff.
Business-purpose loan: A loan made for investment or business use, not for a home you live in.
Seasoning: The waiting period a lender wants between events, such as acquiring a property and refinancing it.
Frequently Asked Questions
Can a first-time flipper get one of these loans?
Yes, at the lower leverage tiers. With fewer than two completed projects, the cost tier is typically 85%, still capped at 75% of ARV. The 620 minimum score applies, with extra conditions below 660. Experience, a realistic budget, and cash reserves improve how a file reads. Terms vary by lender, property, and experience.
Does the loan cover 100% of my purchase and rehab?
No. There is no true 100% purchase program. What can fund at 100% is the rehab budget itself, released in draws as work is completed. Your purchase portion is limited by the loan-to-cost tier and the ARV cap, so you need real equity in the deal.
What happens if my project takes longer than the term?
Terms run 6 to 18 months, and there are no multi-year options. If the work or the sale runs long, talk to your lender about options before the term ends. If the property is stable and rented, many investors refinance into long-term rental financing. Anything beyond that is subject to lender guidelines.
How is this different from a DSCR loan?
A flip loan is sized on cost and ARV and is meant to be temporary. A DSCR loan is long-term financing for a rental, and it qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The first is for buying and fixing; the second is where many investors end up if they keep the property.
Can I use a hard money loan on a property I might live in?
Not on this program. Collateral must be non-owner-occupied 1-4 unit residential property, or ground-up construction up to 10 units. Owner-occupied properties are not offered. Confirm the purpose before you apply.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. As a mortgage broker, Lendmire arranges financing through select lenders in its wholesale network, and nothing here is a commitment to lend.
The exit plan matters as much as the purchase price on short-term financing — see refinancing out of a hard money loan with a DSCR loan.
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. Lendmire has earned two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
Many investors treat hard money as the acquisition tool and plan the exit up front.
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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 — Stop the Confusion for Investor Clients
2. Scotsman Guide — Take a Tutorial on Hard Money Loans
3. Consumer Financial Protection Bureau — Regulation Z §1026.3
4. Federal Register — HUD Prohibition of Property Flipping
5. ATTOM — Q1 Home Flipping Report
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Luxury Rental DSCR Loans In New Jersey · Jersey Shore Vacation Rental Loans: DSCR Financing In Ocean City, Cape May And Long Beach Island · DSCR Cash-out Refinance In New Jersey: Pulling Equity From A Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.