The Quick Read: A hard money lender sizes a loan by running several leverage caps against the property’s value and your project cost, then taking the lowest result. Amortizing payments rarely enter that math, because hard money is almost always interest-only. They matter on the rental-hold side, where rent has to cover principal, interest, taxes, insurance, and dues.
- The loan equals the lowest of the cost cap, the as-is value cap, and the after-repair value cap.
- Hard money terms are interest-only, so the payment seldom limits loan size. The caps do.
- Amortization sets the payment on the long-term DSCR loan you refinance into.
- A DSCR loan is sized by the lower of what the appraisal supports and what the rent can carry.
- Plan both stages before you buy: the hard money advance and the exit loan.
Why Most Hard Money Loans Never Amortize
Hard money is a short-term, interest-only product. You pay interest each month, the balance never shrinks, and the whole amount comes due at the end of the term. Across the programs Lendmire places, terms run 6 to 18 months, interest-only, with no prepayment penalty. Those figures vary by lender, property, and experience.
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.
That structure changes what “sizing” means. With no principal in the payment, the payment is not the thing that limits your loan. The lender cares about the collateral, the plan, and the exit. Per Scotsman Guide, a hard money loan rests primarily on the value of the subject property, with borrower credit secondary. Credit, financial history, and bank statements still get reviewed.
So the honest answer to the title is this. Amortization is not a sizing input on a typical hard money loan. It becomes a sizing input when a loan is tested against rental coverage, which is how DSCR financing works. A DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
The Three Caps: Cost, Value, and After-Repair Value
Hard money lenders run three tests side by side. Each one measures the loan against a different number.
| Test | Measured against | Where it bites |
|---|---|---|
| Loan-to-cost (LTC) | Purchase price plus rehab budget | Most flips |
| Loan-to-value (LTV) | As-is value or contract price | Bridge and refinance |
| Loan-to-ARV | Value after repairs | Heavy rehab, thin margins |
Cost-based tests need one plain rule: the lender applies the lower of as-is value or contract price. Per Scotsman Guide, lenders typically calculate LTV against the as-is value or the contract price, whichever is less. An appraisal or a broker price opinion supplies those values.
Market surveys report hard money LTV averaging about 65% and LTC about 75%, per Scotsman Guide. Those are dated survey averages across all lenders. Across Lendmire’s wholesale network, fix-and-flip leverage runs 85% to 93% of project cost, tiered by completed projects, and never above 75% of after-repair value. Bridge purchases without rehab go up to 80% of purchase price. Cash-out and rate-and-term refinances go up to 65% of value. All of it varies by lender, property, and experience.
Rehab money works differently. Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure, not a purchase LTV.
Which Cap Binds? A Worked Example
The loan is the minimum of the caps. Run it with percentages and you can see exactly which test decides.
Say you are at the 90% of project cost tier, which fits an investor with 2 or more completed projects. The ARV cap is 75%. These are modeled inputs, not market facts.
- Deal one. Purchase plus rehab equals 70% of the after-repair value. Ninety percent of that cost is 63% of ARV. The cost test binds, because 63% sits under the 75% ceiling.
- Deal two. Purchase plus rehab equals 85% of ARV. Ninety percent of cost would be 76.5% of ARV. The ARV cap binds at 75%, so you bring more cash than the cost tier suggests.
- Deal three. The contract price sits well above the as-is value. The lender uses the lower number, so the value test shrinks the loan before cost is even considered.
The lesson is simple. The headline percentage on a lender’s sheet is a ceiling, not a promise. Thin-margin deals hit the ARV cap, and your down payment grows. Strong-margin deals hit the cost cap.
Where Amortizing Payments Actually Enter
Amortization enters at the exit. A DSCR loan is the usual long-term landing spot, and its payment is amortizing on the spine product, a 30-year fixed. Extended 40-year terms and interest-only periods exist through select lenders in the network, and ARM structures are available for investors who want them.
Here is how the lender builds the test.
1. Start with the amortization schedule. Corporate Finance Institute describes the schedule as a table of balance, interest, term, and the interest-and-principal split of each payment. On a fixed, fully amortizing loan, early payments are mostly interest and later ones mostly principal.
2. Add the property charges. PITIA stands for principal, interest, taxes, insurance, and association dues. It is the full monthly obligation the rent has to cover.
3. Divide rent by PITIA. That is the debt service coverage ratio, or DSCR. The lender typically uses the lower of lease rent or appraisal market rent.
4. Back-solve the size. The largest coverage-limited loan is the biggest balance whose amortizing payment, plus taxes, insurance, and dues, is covered by rent used for lender review at the required ratio. This is our own working method for sizing, not a formula any agency publishes.
5. Take the lower number. The final loan is the lesser of the coverage-limited amount and the leverage-limited amount.
Across the network, cash-out refinances on a standard rental top out around 75% LTV, with about 6 months of seasoning as the common expectation. Purchases mostly land at 75% to 80% LTV. 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. Stronger ratios open better pricing and leverage. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Clearing 1.00 does not mean positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside it.
Here is how the two payment structures compare:
| Factor | Interest-only | Amortizing |
|---|---|---|
| Principal paid | None | Every month |
| Payment tested | Interest, taxes, insurance, dues | PITIA |
| Balance at end | Unchanged | Declining |
| Coverage ratio | Higher | Lower |
| Typical home | Hard money term | 30-year DSCR loan |
The same rent supports a larger loan on an interest-only test than on an amortizing test. That edge lasts only while the interest-only period lasts, and only if the lender tests the interest-only payment. Many lenders test the fully amortizing payment instead, and then the interest-only period adds nothing to proceeds. Ask which payment goes in the denominator before you count on the boost.
More cash down lowers the payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Key Terms Defined
Loan-to-cost (LTC): the loan as a share of purchase price plus the rehab budget.
After-repair value (ARV): the property’s estimated value once the planned work is finished, based on comparable sales.
Interest-only (IO): a payment structure where you pay only interest and the balance comes due at maturity.
Amortization: paying a loan down through scheduled payments that split between interest and principal.
PITIA: principal, interest, taxes, insurance, and association dues, the full monthly obligation on a rental.
Seasoning: the waiting period a lender wants after you buy before it will refinance the property.
Where the General Rule Breaks
Several edge cases change the answer.
The payment test can beat the caps. On a refinance into a DSCR loan, a property with heavy taxes and insurance can be coverage-limited long before it hits 75% LTV. The leverage cap becomes the lesser constraint.
Rehab funding splits the loan in two. Hard money releases rehab money in draws, so the amount at closing is smaller than the total commitment. A rental loan generally will not fund the work. Heavy rehab therefore means hard money first, then a refinance.
The exit has its own size limit. The hard money payoff has to fit inside the new loan. Lendmire’s piece Can a Hard Money Loan Have Amortizing Payments on a Flip? walks through that handoff. Size the first loan with the second one in mind.
A fixed note does not fix the whole payment. Taxes, insurance, and dues can change after closing, so coverage can drift even when principal and interest stay put.
Cross-collateral can lower blended LTV. Pledging a second property helps the math, but it ties two assets to one loan.
Some properties are not offered. DSCR financing in the network does not cover manufactured homes, log homes, or barndominiums. Hard money covers non-owner-occupied residential of 1 to 4 units, with ground-up construction up to 10 units.
Business purpose only. Both products 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.
What the Decision Looks Like in Practice
Size both loans before you make an offer. The lender-side math is only half of it.
1. Get a realistic ARV from comparable sales, not the best comp on the street. 2. Run the cost, as-is value, and ARV caps, and mark which one binds. 3. Confirm the cash you bring, which is total cost minus the loan. 4. Estimate the rent and the full PITIA the property will carry once stabilized. 5. Check that the permanent DSCR loan, at about 75% LTV on a standard-rental cash-out, can pay off the hard money balance. Keep in mind that a hard money refinance of your own tops out at 65% of value. 6. Check the credit floor. Hard money starts at a 620 minimum score, with added conditions below 660, while most DSCR programs want around 660 and 700+ unlocks the strongest leverage tiers. 7. Plan the reserves. They vary by lender, leverage, loan size, and transaction type, and are commonly around 6 months of PITIA.
Hard money loans reach up to $5,000,000, with larger by exception. DSCR loans run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures. Every file is underwritten individually, and nothing here is a commitment to lend.
For the full picture of programs, see the complete DSCR loans guide. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path.
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. It arranges financing as a broker through select lenders in its wholesale network across 41 markets, including Washington, D.C.
This article is for general education and is not legal or tax advice, so consult a qualified professional, such as an attorney or CPA, about your own situation.
Frequently Asked Questions
Can a hard money loan have amortizing payments?
Rarely. Hard money terms are interest-only, with the balance due at maturity. Amortization shows up on the long-term loan you refinance into. A few bridge-style products may test an amortizing payment, but that is lender-specific.
What decides the maximum hard money loan?
The lowest of the cost cap, the as-is value cap, and the after-repair value cap. Fix-and-flip tiers run 85% to 93% of project cost, always capped at 75% of ARV. These figures vary by lender, property, and experience.
Does a bigger down payment help a DSCR loan?
A bigger down payment can help. A larger down payment lowers the payment and can lift the coverage ratio. It does not override leverage caps, credit floors, or reserve rules.
Does clearing 1.00 coverage mean the rental cash flows?
No. The ratio compares rent to PITIA only. Vacancy, repairs, management, utilities, and capital expenses sit outside it, so budget for them separately.
What if the rent cannot support the exit loan?
Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. Interest-only periods are also available through select lenders. Otherwise, plan for more cash at the refinance or a smaller hard money advance.
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. Scotsman Guide – Take a Tutorial on Hard Money Loans
2. Scotsman Guide – The Hard Money Space Has Adapted
3. Scotsman Guide – Hard Money, Soft Landing
4. Corporate Finance Institute – Amortization Schedule
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Hard Money Lender Sizes an Interest-Only Fix and Flip Loan · How a Hard Money Lender Uses the Appraisal to Size a Loan · How a Hard Money Lender Sets the Down Payment on a Condo Bridge Loan
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.