The Quick Read: A 1099-only loan is reviewed for the borrower on documented gross contractor income and suits a person who wants a permanent loan but whose traditional personal-income documentation shows too little after write-offs, while hard money qualifies the property and the exit plan and suits an investor who needs a short, interest-only bridge on a rental, with a payoff date. Neither one is a conventional cash-out refinance. Both are ways to reach equity when conventional income documentation does not fit. A third path, a DSCR loan, sits between them for investors who own rental property.
- A 1099-only loan is a long-term personal-income product. Hard money is a short-term, asset-based business loan.
- Hard money on Lendmire’s network covers non-owner-occupied, 1-4 unit residential property only.
- On hard money, a cash-out refinance typically tops out around 65% of value, subject to lender, property, and experience.
- Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized.
- The better choice depends on whether the debt will be tied to you personally or to the property.
Side-by-Side
The table below shows published industry norms for the 1099-only column, since program terms differ widely by lender. The hard money column reflects the program parameters Lendmire’s network works with, and those also vary by lender, property, and experience.
| Factor | 1099-Only Loan | Hard Money |
|---|---|---|
| Review basis | Borrower’s documented gross 1099 income | Property value and exit plan |
| Documentation | 1099 forms, credit, assets, reserves | Appraisal, title, scope of work, exit plan |
| Loan purpose | Often personal or consumer-purpose | Business-purpose only |
| Property types | Commonly primary, second, or investment homes | Non-owner-occupied residential, 1-4 units |
| Entity vesting | Sometimes allowed, varies by lender | Common, often through an LLC |
| Loan horizon | Long-term, permanent structure | Short term, interest-only, set payoff date |
| Reserve expectations | Reviewed, varies by lender | Varies by lender, property, and experience |
Read the table as a map of two different jobs. The 1099 loan underwrites the person. Hard money reviews the property’s rental income and the plan for leaving the loan.
Key Terms Defined
1099-only loan: A mortgage that uses gross income shown on 1099 forms instead of net income from full traditional personal-income documentation.
Hard money: A short-term, interest-only loan secured by real estate and sized mainly on the property.
Cash-out refinance: A new loan that pays off the old one and returns part of the equity as cash.
Seasoning: The length of time you have owned or held a loan on a property before certain refinance options open up.
Exit strategy: The plan for repaying a short-term loan, usually by selling or refinancing into permanent financing.
DSCR: The property’s rent divided by its monthly principal, interest, taxes, insurance, and any association dues.
When a 1099-Only Loan Is the Better Fit
A 1099-only loan is the better fit when you are a contractor, freelancer, or commission earner who needs permanent financing and can show steady 1099 income. Conventional lenders start from the net income on your traditional personal-income documentation. If you write off a lot of expenses, that net number can be small. A 1099 program starts from gross receipts instead, and many apply an expense factor to account for business costs.
Some features usually make this path work:
- Your 1099 history runs across one or two years and looks stable or rising.
- You want a long-term loan with no payoff date forcing another refinance.
- The loan will sit on your personal profile, and you accept that.
- Your credit, assets, and reserves are solid. A 1099 loan is documented, not undocumented.
This is not a loan without documentation. It is reviewed on documented income under the applicable program, subject to lender guidelines. The 1099 forms replace traditional income documentation, but credit, assets, reserves, and collateral still get reviewed.
Weak spots exist too. Income that is falling can trigger extra documentation. A file built late in the year may need year-to-date evidence or a bank-statement path. Terms, leverage, and property eligibility differ from lender to lender, so any specific figure you see advertised for these programs is a market claim, not a promise.
Purpose matters as much as income. If the cash-out is for personal use, or you will live in the home, the loan is generally treated as consumer-purpose. The federal ability-to-repay rule at 12 CFR 1026.43 then requires the lender to make a reasonable, good-faith determination that you can repay, and it requires verification of income with reasonably reliable third-party records. The CFPB’s compliance guide for the rule lists tax-return transcripts and filed conventional personal-income paperwork among acceptable records and says the list is not exhaustive. A 1099 form is the kind of third-party record that fits that framework. That is why a 1099 loan is a documented, non-QM loan rather than a no-paperwork one.
One more practical point. If you want cash from your own home for personal reasons, hard money is not the alternative to weigh, because the hard money program Lendmire places is for investment property only. For that borrower the real comparison is a 1099 loan against a conventional cash-out that documents income through standard personal-income documentation and business records.
When Hard Money Is the Better Fit
Hard money is the better fit when the asset is the story and the borrower’s tax return is not. A rental with real equity, a clear plan, and a credible exit can work even when personal income documents are messy. Underwriting centers on property value, title, and how you will repay.
On the hard money program Lendmire’s network places, the main parameters look like this. Every one varies by lender, property, and experience:
- Collateral: non-owner-occupied residential property, 1-4 units. Owner-occupied homes, commercial, industrial, land, and hospitality are not offered.
- Cash-out and rate-and-term refinance: up to 65% of value on an investment property.
- Terms: 6 to 18 months, interest-only, with no prepayment penalty.
- Loan size: up to $5,000,000, larger by exception, with smaller balances varying by lender.
- Credit: a 620 minimum score, with added conditions below 660. Underwriting stays asset-based.
Hard money suits a few situations well. A cash-out to fund a purchase of a second rental can work when the exit is clear. So can pulling equity from a property that needs work before it can qualify for permanent financing. It also suits an investor who does not want the debt reported against a personal income profile, since these loans are business-purpose and often vested in an LLC, subject to program terms.
The tradeoff is structural. The loan is interest-only with a payoff date, so the principal comes due at the end of the term. If the property does not stabilize, the market shifts, or the next lender declines the file, you must sell, extend, or refinance on someone else’s schedule. Hard money also tends to be a poor fit for an investor who needs five years of runway. The program has no multi-year options. Cash-out leverage at 65% of value is lower than most permanent rental programs allow, so a thin-equity property may not produce much cash. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
It is also worth saying what hard money is not. It is not underwriting-free. The lender still reviews the property, the title, the plan, and your credit. And hard means a hard asset secures the loan, not that approval is hard.
Where DSCR Fits Between Them
A DSCR loan is the permanent alternative that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. 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, and they are exempt from the consumer mortgage disclosure regime.
For an investor with a rental, DSCR often removes the choice between the two products here. It does not ask for 1099 forms, and it does not carry a payoff date. Across the wholesale network, the typical shape looks like this, always subject to lender guidelines:
- Cash-out leverage: around 75% LTV on standard rentals, and around 70% on short-term-rental collateral.
- Seasoning: about 6 months is the common expectation for a cash-out.
- Credit: a 620 floor exists in parts of the network, most programs want around 660, and 700 or higher opens the strongest tiers.
- Coverage: 1.00 is where select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted.
- Structure: a 30-year fixed is the spine, and extended terms and interest-only periods are available through select lenders.
- Reserves: commonly around 6 months of PITIA, though this varies by lender, leverage, loan size, and transaction type.
Be careful with what a coverage number means. DSCR compares rent to the full payment only. Clearing 1.00 does not equal positive cash flow, because repairs, vacancy, management, utilities, and capex sit outside the calculation. The strongest files clear two tests at once: enough equity and enough rental coverage.
The details are in Lendmire’s complete DSCR loans guide. Not every property qualifies. DSCR on manufactured homes, log homes, and barndominiums is not offered in the network.
The Double-Closing Trap
Using hard money as a bridge can mean paying for two transactions instead of one. You close the short-term loan, hold the property through the work or stabilization, then close a second loan to pay it off. Each step has its own costs, its own review, and its own chance of delay.
Seasoning adds a wrinkle. Permanent cash-out programs look at how long the property has been owned or held, and the exact test varies by lender. A recent hard money loan can change how a later lender views the transaction. If the end goal is a permanent loan, ask the next lender how it treats the hard money payoff before you sign the first one.
Some investors do refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path.
A 1099 loan, by contrast, is a single permanent closing. That simplicity is its main structural advantage over hard money used as a bridge.
Which Borrower Profile Points Where
Think of the choice as a few honest scenarios rather than a rule.
Picture a self-employed consultant with strong 1099 receipts, heavy write-offs, and a home they live in. A 1099-only loan is the realistic product, and hard money is not on the table because it excludes owner-occupied property.
Consider an investor with three rentals, an LLC, and a fourth property that needs a renovation before it will rent. Hard money can fund the work against the property, with the plan to refinance into DSCR financing afterward. The personal income story barely matters.
Say you own a stable, rented duplex with meaningful equity and want cash for the next purchase. Here DSCR cash-out at around 75% LTV is usually worth pricing against hard money at up to 65% of value, because the permanent loan has no payoff date. If rent coverage is thin, a conventional cash-out or a 1099 loan against your personal profile may be the only way to access that equity.
Last, run the numbers on an investor with falling income and a property that barely covers its payment. Neither product is a comfortable fit. Hard money adds a balloon on top of a weak exit, and a 1099 loan may stall on declining income. That file may need more equity, a stronger property, or a different market before any loan makes sense.
The Purpose Test Most Borrowers Skip
Purpose can flip a loan from business to consumer. A cash-out on a rental is not automatically business-purpose. According to Doss Law’s business-purpose guide, a cash-out refinance of a single-family rental used to pay personal income taxes is an example of a consumer-purpose loan, and owner occupancy can also change the classification. Misclassifying the purpose carries real exposure for the lender.
For you, the practical effect is simple. If part of the cash is headed for personal spending, say so up front and let the lender classify the loan. Hard money and DSCR are business-purpose products. A 1099 loan is often a consumer-purpose one.
Common Mistakes
- Treating a 1099 loan as a no-document loan. It still reviews credit, assets, reserves, and collateral.
- Using hard money without a second exit. If the first plan fails, you need a fallback that does not depend on the same market conditions.
- Ignoring leverage math. At up to 65% of value on a hard money cash-out, a property with modest equity may produce little cash after payoff of the existing loan.
- Assuming DSCR above 1.00 means profit. It measures rent against the payment, not your net income.
- Comparing the loans on the wrong axis. The key question is who the debt attaches to and when it comes due, not just how fast the money arrives.
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.
A Balanced Verdict
A 1099-only loan is the stronger choice when you need permanent financing, your income is real but under-reported on paper, and you are comfortable with the debt sitting on your personal profile. Hard money is the stronger choice when the property carries the file, the plan is short, and a clear exit exists. If you own a rental and the rent covers the payment, a DSCR cash-out may beat both, with no income review and no payoff date.
The flip points are easy to name. If you live in the property, hard money is out. If your 1099 income is falling, a 1099 loan gets harder. If the exit is uncertain, hard money becomes risky. Start with the property type, the purpose of the cash, and how long you need the money, then pick the product.
This article is general information and not legal or tax advice. Consult a qualified professional, such as an attorney or CPA, about your own situation. Program terms vary by lender, property, and borrower, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I use hard money to pull cash out of my primary residence?
Not through the hard money program Lendmire’s network places. That program covers non-owner-occupied residential property with 1-4 units and is business-purpose only. Owner-occupied homes are not offered. If you live in the home, a conventional cash-out or a 1099 program, depending on how you document income, is the more realistic route.
Does a 1099-only loan require conventional income documentation?
Many programs use 1099 forms in place of full traditional income documentation, usually for one or two years, along with year-to-date income evidence. Credit, assets, reserves, and the property are still reviewed. Requirements differ by lender, so a given program may ask for more or less than another.
Can I refinance out of hard money into a DSCR loan?
Often, yes, once the property is stabilized and rented. Many investors take this path, and it is a common exit for hard money. On standard rentals, DSCR cash-out typically tops out around 75% LTV, and about 6 months of seasoning is the common expectation. Eligibility depends on lender guidelines, credit, property review, and rent coverage.
Is hard money always the faster, simpler option?
No. It trades a shorter process for a payoff date. The loan is interest-only for 6 to 18 months, so you must sell or refinance at the end. If the exit fails, the savings in paperwork can disappear. A permanent loan costs more effort up front but removes that deadline.
Does a DSCR loan work if my rent barely covers the payment?
Possibly. Many select programs start at 1.00 coverage, and a separate select-lender path goes below 1.00, with leverage and terms adjusted. Stronger ratios generally open better leverage. Clearing the ratio still does not mean positive cash flow, so test your repairs, vacancy, and management costs separately.
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 mortgage broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
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. CFPB / Cornell LII – 12 CFR 1026.43
2. CFPB – ATR/QM Small Entity Compliance Guide
3. Doss Law – Business Purpose Exemption Simplified
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Conventional Loan Cash-Out Refinance for Investment Property Owners · Should a Homeowner Choose a Cash-Out Refinance or a Home Equity Loan? · Conventional Cash-Out vs DSCR Cash-Out for an Owner With a HELOC
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- 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.