The Quick Read: A hard money bridge loan is short-term, interest-only money from a private lender who reviews the property’s rental income, your plan, and your exit, while seller financing is a note the seller agrees to carry, with terms that are whatever the two of you negotiate.
- Hard money fits a house that needs work, a purchase where the seller wants a clean cash sale, or any deal where you have a clear refinance or resale plan.
- Seller financing fits a seller who owns the home free and clear, wants steady payments, and will accept terms a lender would not.
- Typical hard money terms run 6-18 months, interest-only, with leverage that varies by lender, property, and experience.
- Seller notes have no guideline sheet, so the paperwork, the title position, and the balloon date are all negotiated.
- Both usually end in a refinance or a sale, so the exit decides which one is safer.
This comparison is for investors buying a non-owner-occupied house. These are business-purpose loans, not owner-occupant mortgages.
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 loan from a private lender, secured by the real estate and underwritten mostly on the property and the plan.
Bridge loan: short-term financing that spans a gap between two events, such as buying a house and refinancing it. The labels “hard money” and “bridge” overlap and are used loosely. A useful rule is that hard money describes where the money comes from, and bridge describes the job the loan does.
Loan-to-cost: the loan amount as a share of what the project costs, including the purchase and the rehab, rather than a share of today’s value.
After-repair value (ARV): what the lender expects the house to be worth once the work is finished.
Balloon payment: a large lump sum due at the end of a short term, after smaller payments along the way.
Contract for deed: a seller-financing structure where the seller keeps legal title until the buyer finishes paying.
Due-on-sale clause: a clause in a mortgage that lets the lender demand full repayment if the property is sold or transferred.
Side-by-Side
The table below puts the two options next to each other on a single-family purchase. The hard money column reflects select programs in Lendmire’s wholesale network. The seller financing column shows published industry norms, because no guideline sheet governs it. Every figure varies by lender, property, and experience, and nothing here is a commitment to lend.
| Factor | Hard Money Bridge Loan | Seller Financing |
|---|---|---|
| Who provides the money | Private lender | The seller |
| Review basis | Property, plan, exit; 620+ score | Whatever the seller accepts |
| Documentation | Contract, valuation, scope, exit plan | Note plus mortgage or deed of trust |
| Property types | Non-owner-occupied, 1-4 units | Whatever the seller will carry |
| Entity vesting | Entity borrowers common, per program | Negotiated; usually matches the note |
| Term | 6-18 months, interest-only | Negotiated; balloon common |
| Prepayment | None on this program | Lock-outs can be negotiated |
| Reserves | Vary by lender and project | No guideline; seller decides |
| Title position | Buyer on title at purchase | Buyer, or seller until paid |
| Typical exit | Sale or refinance | Balloon refinance or sale |
Two rows deserve a closer look. The first is qualification. A private lender looks at collateral, but it still reviews credit and experience, and the program here sets a 620 minimum score with additional conditions below 660. A seller has no such sheet and may care more about your down payment and your plan than about your score.
The second is title position. With a note and mortgage, you hold the deed at closing. Under a contract for deed, BiggerPockets contributors describe the buyer as not receiving the deed until the final payment or until a refinance pays the seller in full. That difference matters later, when a new lender looks at who owns the house.
How a Hard Money Bridge Loan Works on a House
A hard money bridge loan on a single-family home is sized against the deal, and the property is the collateral. The lender wants to see a purchase contract, a valuation, a scope of work if there is a rehab, entity documents if you buy through an LLC (per lender program requirements), and a believable exit.
Leverage depends on the project type and your track record. Across the network, these are typical ranges:
- Bridge purchase without rehab: up to 80% of the purchase price.
- Fix-and-flip: 85% of project cost with fewer than two completed projects, 90% with two or more, and 93% with five or more. Every tier is capped at 75% of after-repair value.
- Rehab budget: up to 100% of the rehab budget can fund in draws against completed work. This is a budget figure, not a purchase LTV.
- Refinance: up to 65% of value on a cash-out or rate-and-term refinance.
The top tier is reserved for experienced investors. Loan sizes run up to $5,000,000 with larger amounts by exception, and the range matters little for most single-family deals.
The terms are 6-18 months, interest-only, with no prepayment penalty. There are no multi-year options on the current program. An investor who needs longer runway plans to refinance into long-term rental financing instead.
How Seller Financing Works on a House
Seller financing means the seller extends credit as part of the sale. In the common version, the parties sign a promissory note that spells out the amount, interest, and payoff schedule. A mortgage or deed of trust, depending on the state, secures the note against the house. The note itself usually isn’t recorded, but the security instrument is.
The terms come from negotiation. You and the seller decide the down payment, the payment schedule, the maturity date, whether there is a balloon, and what happens on late payments or early payoff. Nothing in a lender’s guideline sheet limits those choices, which is both the appeal and the risk.
One short business-purpose note belongs here. DSCR 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.
Sellers face their own limits. The CFPB’s loan originator compliance guide lists narrow exclusions for people who finance their own sales. One covers a natural person, estate, or trust financing one property in a 12-month period. Another covers financing three or fewer properties in 12 months, with conditions on the structure. NAR’s summary describes similar three-property criteria. Whether those rules touch a particular investor deal turns on facts such as the buyer’s purpose and the seller’s volume, so a real estate attorney should review the structure before you sign.
When a Hard Money Bridge Loan Is the Better Fit
Hard money is the better fit when the property or the timing makes the seller’s cooperation irrelevant. Consider these situations:
- The house needs work. A distressed single-family home may not suit a seller’s patience or a bank’s appraisal, but a private lender can fund the purchase and release rehab money in draws as work is completed.
- The seller wants cash. Many sellers have a mortgage to pay off, an estate to settle, or simply no wish to be a lender. A bridge loan lets you present a straightforward purchase.
- You have an experienced track record. The highest leverage tiers reward completed projects, so a repeat flipper gets more of the project cost funded than a first-timer.
- You need a clean payoff path. The program carries no prepayment penalty, so a sale or refinance ahead of schedule does not trigger an exit fee.
- You want title in your name from day one. A purchase loan puts the deed in the buyer’s name, which starts the seasoning clock for a later refinance.
Hard money is the wrong tool when you have no exit. The term is short and interest-only, so the balance does not shrink along the way. If the resale stalls or the property can’t support a refinance, you face a maturity with nowhere to go. It also is not meant for owner-occupied homes, and the collateral must be a residential property of one to four units.
A realistic exit is often a refinance into long-term rental financing. Once the house is stabilized and leased, many investors move out of hard money into a DSCR loan, and Lendmire arranges that path through its lender network.
When Seller Financing Is the Better Fit
Seller financing is the better fit when the seller is willing and the deal does not need institutional underwriting. It works best in these situations:
- The seller owns the home free and clear. With no underlying mortgage, there is no lender above the seller who can object to the deal.
- The seller wants income, not a lump sum. A retiree or an estate may prefer steady payments over cash, which gives you room to negotiate.
- The house won’t qualify for institutional money yet. A seller can accept a property in a condition or with a documentation problem that a lender would not.
- You can’t meet a private lender’s score or experience conditions. A seller may weigh your plan and down payment more heavily than your credit file.
- You want a longer runway than 6-18 months. A negotiated note can run past the hard money term, although a balloon date usually still arrives.
The risks sit mostly in the paperwork. If the seller still has a mortgage, selling with financing can trigger that mortgage’s due-on-sale clause, and the seller’s lender may demand full repayment. A buyer who relies on that lender staying quiet is betting on someone else’s behavior.
Contract-for-deed structures carry extra risk. The seller keeps legal title, so a stale memorandum, an unrecorded contract, a deceased seller, or a junior lien on the seller can all snag a later refinance. A recorded note and mortgage with a deed in your name avoids most of that.
Balloons deserve respect. A seller note often ends in a lump sum, so the refinance has to work at the balloon date. Sellers also have tax questions of their own.
Three Scenarios on the Same House
These scenarios use ratios and percentages only, and they illustrate how the options behave rather than predict results.
The distressed fixer. Say you find a single-family home that needs a full renovation. A seller-financed note rarely funds repairs, and the seller may not want the risk. A hard money bridge loan funds the purchase at a share of project cost, with rehab dollars released in draws. For a two-project investor, that means 90% of project cost, still capped at 75% of after-repair value. The plan works only if the finished house supports the refinance or resale you are counting on.
The free-and-clear seller. Picture an owner who inherited a rental, has no mortgage, and would like monthly income. Here seller financing can beat a private lender on flexibility, because the two of you set the down payment and the maturity. The investor’s job is to insist on a recorded security instrument, a deed in the buyer’s name, and a balloon date far enough out that a refinance is realistic.
The seller with a mortgage. Consider a seller who is still paying a bank. A seller-financed deal could trip the due-on-sale clause, so this setup deserves caution. A hard money purchase avoids the issue, because the seller is paid off at closing. Many investors in this spot choose the bridge loan and refinance once the property is leased.
Can You Combine Them?
Sometimes. An investor can pair a private lender’s first lien with a seller note behind it, or use a seller note for part of the price. Lien position, consent, and a combined-leverage check all fall to the lender, so raise the structure before you commit. Some lenders will not allow a second lien behind their note, and terms vary by lender.
Planning the Exit: Where the DSCR Takeout Fits
Both options usually end the same way, with a refinance or a sale. Documentation drives how clean the refinance is.
After a hard money loan, a clean payoff statement and a recorded lien release are generally enough. A straight payoff that covers only the hard money balance and closing costs is generally treated as a rate-and-term refinance, while cash beyond that makes it a cash-out refinance. Lender policy sets that line. Cash-out on a standard rental generally tops out around 75% LTV across most of the network, and about six months of seasoning is the common expectation.
After a seller note, the paperwork varies. A recorded note needs a payoff statement. A land contract needs a recorded deed in the buyer’s name. An informal or unrecorded note needs a title search and a written payoff. A deed in the buyer’s name starts the seasoning clock, and a contract for deed does not.
A DSCR loan then qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. DSCR compares rent to the full monthly obligation of principal, interest, taxes, insurance, and any association dues. Where many select programs start at 1.00, a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing the ratio is not the same as positive cash flow, because repairs, vacancy, management, and utilities sit outside the calculation. A larger down payment can lift the ratio, but it does not erase leverage caps, credit floors, reserve rules, or property eligibility. Lendmire’s complete DSCR loans guide covers those mechanics in detail.
Mistakes That Cost Investors Money
- Treating a short term as a long hold. A 6-18 month interest-only loan only works with a funded exit plan.
- Skipping the title work on a seller deal. Without a recorded deed in your name, a later refinance can stall.
- Ignoring the seller’s own mortgage. A due-on-sale clause is the seller’s problem that quickly becomes yours.
- Assuming a seller will accept any balloon date. Negotiate for runway before you sign, since a short balloon recreates hard money’s exit risk with fewer protections.
- Confusing leverage numbers. Hard money leverage may be quoted against project cost or against after-repair value, and the two are not interchangeable.
The Balanced Verdict
Neither option is better in the abstract. Hard money is a purpose-built tool with a defined structure, a short clock, and an expectation that you will refinance or sell. Seller financing is a negotiation with more freedom and less structure, and its safety depends on the seller’s situation and your paperwork.
Pick hard money when the house needs work, the seller wants cash, or you have the experience to use the higher leverage tiers. Pick seller financing when the seller owns free and clear, wants payments, and will sign a recorded note with a realistic maturity.
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. Programs are available through select lenders across 41 markets, including Washington, D.C., and the illustrative calculator on the site can give you a rough estimate.
Frequently Asked Questions
Are a hard money loan and a bridge loan the same thing?
They overlap, and the labels are used loosely. Hard money usually describes a private lender’s secured, asset-based loan, while bridge describes the job of spanning a gap until a sale or refinance. A hard money bridge loan is both at once, and the useful questions are what the lender underwrites and how you exit.
Can I use hard money for a house I plan to live in?
No. The program described here covers non-owner-occupied residential property of one to four units. Owner-occupant financing is a different product, and this article addresses investors only.
Does seller financing mean I own the house?
It depends on the structure. With a note and mortgage, the deed goes in your name at closing. Under a contract for deed, the seller keeps legal title until the final payment or a payoff refinance, which affects refinancing and seasoning.
What if the seller still has a mortgage?
The seller’s lender may have a due-on-sale clause that lets it demand full repayment when the property transfers. Some investors plan around that risk, but you should have a payoff or financing plan if the lender acts. A hard money purchase avoids the problem because the seller is paid off at closing.
What happens when the term ends?
Both end with a payoff event. With hard money, you sell or refinance before the 6-18 month term runs out. With a seller note, a balloon is common, so the refinance has to work on the maturity date. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
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References
1. BiggerPockets: how to structure a seller-financed deal
2. CFPB Loan Originator Rule Small Entity Compliance Guide
3. NAR seller-financing rules, via RMLO
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Hard Money Bridge Loan on a 2-4 Unit Need a Down Payment? · Can You Use a Hard Money Loan to Buy and Flip a House? · Can You Have More Than One Fix and Flip Hard Money Loan at Once?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.