The Quick Read: Only when the deal’s spread can absorb the full financing cost, the exit is short and reliable, and the loan lets you do a deal you could not otherwise do. Hard money is a tool for a defined, short project. It is a poor choice as a long-term financing habit.
- Margins are thinner. The typical flip now earns a gross margin in the low 20s as a percent of price, and financing cost comes out of that.
- Leverage is tied to cost, not value. Across the wholesale network Lendmire works with, fix-and-flip leverage runs 85% to 93% of project cost, capped at 75% of after-repair value, depending on experience.
- The exit decides everything. A sale or a refinance has to be realistic before you close, not after.
- You still bring cash. Closing costs, the gap between loan and price, and working capital for draws are all on you.
- Terms are short. Programs typically run 6 to 18 months, interest-only, and vary by lender, property, and experience.
What Is a Hard Money Bridge Loan, Really?
A hard money bridge loan is a short-term, interest-only business loan secured by an investment property. “Hard money” describes the type of lender and underwriting. “Bridge” describes the purpose: it carries you from the purchase to a defined next event.
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.
Lenders and borrowers use the labels interchangeably. A flip loan might be called hard money, bridge, or fix-and-flip, and the structure underneath is often the same. The label matters less than three questions. What is the leverage, what does the full cost look like, and what is the exit?
Underwriting is asset-based. Lenders look at the property, the renovation plan, and how you will repay. Credit still counts. Most programs we place files with want a 620 minimum score, with added conditions below 660, and first-time investors generally land in the lower leverage tiers.
The Worth-It Test
Run the deal through five questions. If you cannot answer yes to most of them, the loan is probably not worth it.
1. Is the spread wide enough? Purchase plus rehab plus selling costs must sit comfortably below the after-repair value, or ARV. That is the price the finished home should sell for. What remains must cover every financing charge and still leave real profit.
2. Is the timeline believable? Interest accrues every month the loan is open. A schedule that only works if nothing goes wrong is not a schedule.
3. Is the exit certain? For a flip, that means comparable sales that support your resale price. For a hold, it means rent that supports a refinance.
4. Does the loan unlock the deal? If a cheaper source of funds would work, use it. Hard money earns its place when it lets you buy a property that conventional financing will not touch.
5. Do you have a cushion? You need cash for surprises and for the stretch between draws.
Market data shows why question one matters. ATTOM’s latest quarterly flipping report puts the typical flip profit margin at 21.5%, down from 25.7% the quarter before and 27.6% a year earlier. The same report shows a typical flip takes 161 days from purchase to resale.
That margin is gross. ATTOM’s own release notes that gross profit leaves out rehab and other costs, which it puts at roughly 20% to 33% of ARV. Financing charges come on top of that. A thin gross margin can vanish once all of it lands.
How Much Leverage Does a Flip Loan Carry?
Flip leverage is measured against project cost, which is purchase price plus rehab budget. Loan-to-cost is the loan amount divided by that total. The top tiers go to experienced investors, and every tier is capped at 75% of ARV. These are typical ranges that vary by lender, property, and experience, and nothing here is a commitment to lend.
| Borrower experience | Leverage (of project cost) | Hard cap |
|---|---|---|
| Fewer than 2 completed projects | 85% | 75% of ARV |
| 2+ completed projects | 90% | 75% of ARV |
| 5+ completed projects | 93% | 75% of ARV |
Other structures follow different math. A bridge purchase with no rehab typically goes up to 80% of purchase price. Cash-out and rate-and-term refinances go up to 65% of value. Rehab money funds in draws, up to 100% of the rehab budget, against completed work. That figure is a rehab-budget measure, not a purchase leverage number.
There is no true 100% purchase program. A lender that advertises one is usually describing a high cost tier plus draws, and you still bring cash. Loan sizes run up to $5,000,000 on most files, with larger amounts by exception.
A Worked Deal in Percentages
Run the numbers on a modeled flip. Every input below is an assumption for illustration, expressed as a percent of ARV. None of it is market data, and the financing cost is intentionally left out.
| Line item (modeled) | % of ARV |
|---|---|
| Purchase | 60% |
| Rehab budget | 15% |
| Selling and closing costs | 8% |
| Spread before financing and carry | 17% |
Project cost here is 75% of ARV. At the 85% tier, the loan is about 64% of ARV, well under the 75% cap. You bring roughly 11% of ARV plus closing costs and reserves.
Now test the spread. Your 17% has to pay the lender’s full cost for the term: fees, draw and inspection charges, and every month of interest. Get that total in writing as a percent of ARV before you commit. If financing eats half the spread, a two-month delay can erase most of what is left.
Sensitivity is where flips go wrong. An extra month adds carry and may push the sale into a softer season. Build the deal so it still works at the long end of the schedule. If it only works at the best case, it does not work.
What You Actually Bring to Closing
Hard money does not mean no money down. Even at 93% of project cost, three buckets of cash remain:
- The gap between the loan and the purchase price.
- Closing costs and lender fees.
- Working capital for the rehab.
That last bucket surprises first-timers. Draws reimburse work after it is completed, so you front the cost of each stage and then request funds. Contractors want payment on their schedule, not the lender’s. Plan to carry a rolling balance.
Reserves matter too. A lender looking at your file wants to see that you can survive a slow stretch, so liquidity is part of the review even though the loan is asset-based.
When the Exit Slips
Terms of 6 to 18 months give you room, and the typical 161-day flip fits inside them. A flip that runs long is a different story. Three things commonly cause it: rehab overruns, a slower sale than comps suggested, and a refinance that cannot clear underwriting.
Plan the failure modes before closing:
- Rehab runs over. Keep a contingency inside your own cash, not inside the lender’s draw schedule.
- The sale lags. Know how long comparable homes take to sell in that neighborhood, and price accordingly.
- The hold plan fails. If rent does not support the refinance, the property has to be sold. Decide flip versus hold before you close the bridge.
Programs of this type typically carry no prepayment penalty, which helps if you sell early. Extension options exist at some lenders but vary, so confirm the cost before you count on one.
When It Is Not Worth It
Skip hard money when the deal only works with a perfect timeline. Skip it when the spread is thin before financing, when you cannot articulate the exit, or when you have no cash cushion. Skip it when a cheaper source of funds would do the same job.
Beginners should be especially careful. A first flip has more unknowns in the rehab budget, the schedule, and the resale price. A smaller project, a partner, or a more modest deal can teach the same lessons with less exposure.
Here is how the main options compare, qualitatively:
| Option | Fits when | Main drawback |
|---|---|---|
| Hard money bridge | Short project, wide spread, clear exit | Highest financing cost, short clock |
| Cash or partner capital | You have funds or a partner | Ties up capital, shares profit |
| Smaller deal | First flip, limited cash | Lower profit ceiling |
| Skip the deal | Spread is thin | You give up the upside |
Lendmire’s piece HELOC vs Hard Money for a Flip: Which Wins at Different Deal Sizes goes deeper on that choice.
How Experience Changes the Answer
New investors get the lowest leverage tier and the most scrutiny. That is not a punishment. It reflects how the lender sees risk, and it means you bring more cash. For a first flip, hard money can still be worth it if the deal has a wide spread and you have solid reserves.
Repeat flippers move up the tiers. At 2 and then 5 completed projects, the same loan covers more of the cost. Leverage can help a flip business scale across multiple projects even when it trims the return on any single one. That is an argument, not a guarantee, since every extra dollar borrowed is also a dollar at risk.
Reading a Term Sheet When the Labels Blur
Hard money loans are business-purpose investor loans, so they are reviewed differently from a standard owner-occupied mortgage. Federal Regulation Z commentary on business-purpose credit exempts credit extended primarily for a business or commercial purpose. The practical result is that investor flip loans carry fewer standardized consumer disclosures. The comparison work falls on you.
When you compare offers, ask each lender for the same things:
- Total cost of the loan as a percent of the loan and as a percent of ARV.
- Every fee, including draw, inspection, and administrative charges.
- Whether interest accrues on the full rehab budget or only on funds drawn.
- The maturity date, the extension terms, and any prepayment terms.
- What happens at maturity if the exit has not happened.
A low headline number with a long fee list is not a low-cost loan. The headline is only one part of the cost.
The Exit Into Rental Financing
If the property will be a rental, the bridge only works when the refinance works. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. Our complete DSCR loans guide covers how those loans are built.
A DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Coverage of 1.00 is where many select programs start, and 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, since repairs, vacancy, and management sit outside it.
Do the work backward. The bridge term must outlast the rehab, the lease-up, any seasoning the refinance requires, and appraisal and underwriting. DSCR loans are built for holding, and a sale soon after closing can run into prepayment terms depending on the program, so they are not a flip tool.
Key Terms Defined
Hard money loan: a short-term loan secured by the property and underwritten mainly on the asset and the exit plan.
Bridge loan: a short-term loan that carries a property from purchase to a defined next event, such as a sale or refinance.
ARV (after-repair value): the price the finished property should sell for, based on comparable sales.
Loan-to-cost: the loan amount divided by purchase price plus rehab budget.
Draw: a release of rehab funds after a stage of work is completed and inspected.
Interest-only: a payment structure where you pay only interest during the term and repay principal at payoff.
Exit strategy: how you repay the loan, by selling the property or refinancing into long-term financing.
Frequently Asked Questions
Is a hard money bridge loan worth it for a first flip?
Sometimes, if the spread is wide and your cash cushion is real. First-time investors typically sit in the lower leverage tier, so they bring more of their own cash. A smaller first project often teaches the same lessons with less exposure.
What is the difference between hard money and a bridge loan?
Hard money describes the lender and underwriting style, while a bridge describes the purpose. They overlap heavily, and many flip loans are both. Compare structure, leverage, and total cost instead of relying on the label.
What happens if I cannot sell before the loan matures?
You would typically need to extend, refinance, or pay off the balance another way. Extensions vary by lender and carry their own costs. Terms generally run 6 to 18 months, so build your plan around the long end of the schedule.
Can a DSCR loan fund a flip instead?
Usually not. DSCR loans are designed for rental holds and can carry prepayment terms that make a quick sale expensive. They work better as the refinance after a hard money rehab, when the property is stabilized.
How much cash do I need besides the down payment?
Plan for closing costs, reserves, and working capital between draws. Draws reimburse completed work, so you front each stage. The amount varies by lender, property, and experience.
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 that arranges these loans through select lenders in its wholesale network, across 41 markets, including Washington, D.C. Every structure is subject to lender guidelines and individual underwriting, and nothing here is a commitment to lend.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 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. attomdata.com: Home Flipping Profits Continue Gradual Two Year Decline
2. ATTOM release on gross vs. net flip returns
3. CFPB Regulation Z, section 1026.3 commentary
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Seasoning Rules for a Two-Step DSCR Cash-Out After Hard Money · Hard Money Loan ARV Requirements in a Small Town With No Comps · Is a DSCR Loan the Usual Permanent Financing After a Flip You Keep?
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.