The Quick Read: No. A hard money loan shares one feature with a mortgage, a lien on the property, but it is a short-term, interest-only bridge loan underwritten on the property, the rehab plan and the exit, not a long-term home loan for beginners. Experienced investors use it as often as first-timers do, and first-timers usually get less leverage.
- Terms on the current network program run 6-18 months, interest-only, with no prepayment penalty.
- Fix-and-flip leverage is tiered by completed projects: 85% of project cost with fewer than 2, 90% at 2+, 93% at 5+, all capped at 75% of after-repair value.
- Credit minimum is 620 on most files, with added conditions below 660.
- The loan ends at maturity, so the exit decides the deal: a sale, or a refinance into long-term rental financing.
- Everything varies by lender, property, and experience, and nothing here is a commitment to lend.
Where a Hard Money Loan Looks Like a Mortgage
The resemblance is real but narrow. The lender takes a lien on the property. If the borrower defaults, the lender can foreclose. Closing involves title work, an appraisal or broker price opinion, insurance and a settlement statement. A new flipper who has only seen a mortgage will recognize the paperwork.
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 is where the match ends. A mortgage is a long-term product built around the borrower’s finances. A hard money loan is a short bridge built around the asset.
Where It Is Different
Think of it as a different tool for a different stage of the deal.
| Factor | Hard money loan | Long-term rental mortgage |
|---|---|---|
| Purpose | Buy and rehab, then exit | Hold a stabilized rental |
| Underwriting basis | Property, rehab plan, exit | Property income or borrower finances |
| Term | 6-18 months | Long-term, often 30-year fixed |
| Payments | Interest-only | Principal and interest |
| End of loan | Sale or refinance at maturity | Amortizes over the term |
| Property condition | Can be distressed | Usually rent-ready |
Two rows matter most for a first deal. The term is short, so the clock starts the day you close. And the payment is interest-only, so nothing pays the balance down. The full balance is due at maturity, and your sale or refinance has to produce it.
Across the wholesale network, the loans are asset-based on the front end, but “asset-based” does not mean “no underwriting.” Lenders look hard at comps, the budget, the contractor bids and the exit. A deal that does not pencil on those items usually does not get a term sheet, whatever the borrower’s credit looks like.
Why the Legal Category Is Different
The short version is that these are business-purpose loans. Federal guidance treats credit used to acquire or improve non-owner-occupied rental property as business-purpose credit, per the federal consumer-finance regulator’s Truth in Lending exam procedures. Investment-purpose loans fall outside the consumer repayment-capacity framework, as the Federal Register notice on the repayment-capacity rule states.
For a flipper, that has practical effects. The program is for non-owner-occupied property only. You cannot live in the house. Lenders do not run the consumer income and debt-ratio tests, which is why the underwriting can focus on the project. It also means consumer-mortgage protections do not frame the deal, so the loan documents and your own math matter more.
What Network Hard Money Looks Like for a First Flip
Lendmire brokers hard money and private money through its wholesale network, across 41 markets including Washington, D.C. The program parameters below reflect select lenders in that network and vary by lender, property and experience.
- Fix-and-flip leverage: 85% of project cost with fewer than 2 completed projects, 90% at 2+, 93% at 5+. Every tier is capped at 75% of after-repair value. These are loan-to-cost figures, not purchase LTVs.
- Rehab funds: up to 100% of the rehab budget funds in draws against completed work. That is a budget figure, not a purchase percentage.
- Bridge purchase without rehab: up to 80% of purchase price.
- Refinance (cash-out or rate/term): up to 65% of value.
- Ground-up construction: up to 90% of cost and 75% of completed value at 3+ completed projects.
- Loan size: up to $5,000,000, larger by exception.
- Property: non-owner-occupied residential, 1-4 units. Construction can go to 10 units.
- Credit: 620 minimum, with added conditions below 660.
There is no true 100% purchase program. When you hear “100% financing,” it usually means a high-leverage purchase tier plus the rehab draw funding. The top tier is reserved for investors with a track record. First-timers qualify at the lower tiers, which means more cash in the deal.
Why First-Timers Get Less Leverage
Experience is a risk input. A lender that sees five completed projects knows you have handled contractors, budgets and a sale. A lender that sees none is pricing in the chance of overruns. So the first-time tier asks for more equity.
Points and fees are charged up front, so the cash you bring must cover them as well as your equity share.
The strongest first-timer file is boring. It has a purchase contract, a line-item scope, signed bids, an appraisal or price opinion, proof of cash and reserves, and a written exit. Files that skip the exit section are the ones that stall.
How a First Flip Runs, Step by Step
This is a hypothetical sequence. Actual structure varies by lender and project.
1. Contract and scope. You sign a purchase contract and build a line-item rehab budget backed by contractor bids.
2. Lender review. The lender checks the purchase price against the comps, the after-repair value against sold comps, and the budget against the scope. This is where weak deals drop out.
3. Closing. Title is cleared, the property is insured, and the loan funds the purchase portion. Your equity share comes in as cash. If you are buying through an LLC, the entity documents go in the file, subject to lender program eligibility.
4. Draws. Rehab money is released against completed work, usually after an inspection. You often front the contractor and get reimbursed, so working capital matters.
5. Hold. Payments are interest-only. Nothing amortizes, and the clock on the 6-18 month term keeps running while you rehab, list and wait for a buyer.
6. Exit. You sell and pay off the loan. Or you refinance into long-term financing if you are keeping the property as a rental. There is no prepayment penalty on the network program, so an early payoff does not trigger a fee.
If the sale is the exit, the number that decides the deal is the after-repair value, not the purchase price. A rehab that runs long, or comps that soften, can erase the margin before the loan matures.
When the Exit Fails
Say the rehab overruns by two months and the listing sits. The loan is still due. This is the real risk of short-term debt, and the one first-timers underestimate.
Options are limited and cost money. You can ask the lender about an extension, which varies by lender and is not guaranteed. You can refinance into longer-term debt if the property qualifies. Or you can sell at a discount to pay off the balance.
The fix is to build slack in at the start. Pick a term with room past your honest schedule. Keep reserves for the overrun. And confirm the take-out before you buy, not after.
Can a Hard Money Loan Lead Into a DSCR Loan?
Often, yes. For a property you plan to keep, many investors refinance out of hard money into long-term DSCR financing once it is stabilized. Lendmire brokers that path. A DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, so it fits a finished, leased rental rather than a distressed property.
On the network, the DSCR side looks like this: purchase leverage mostly lands at 75%-80% LTV, cash-out tops out near 75% LTV, and coverage of 1.00 is where select programs start. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Credit floors run from 620 in parts of the network to roughly 660 on most programs. Clearing 1.00 is not the same as positive cash flow, since repairs, vacancy, management and capex sit outside the calculation. For the full picture, see the complete DSCR loans guide.
For what happens when the term ends, see Lendmire’s article The Hard Money Clock Runs Out: Calls We Take From First-Time Flippers.
Key Terms Defined
After-repair value (ARV): The estimated value of the property once the rehab is finished. Lenders cap leverage against it.
Loan-to-cost: The loan amount divided by the total project cost, meaning purchase plus rehab.
Draw: A release of rehab funds after completed work is inspected.
Interest-only: A payment structure where you pay interest each month and the balance stays unchanged until maturity.
Take-out: The sale or refinance that pays off the short-term loan.
Is It the Right Tool for Your First Deal?
Run this checklist before you commit.
- Do the comps support both your purchase price and your after-repair value?
- Does the scope have signed bids, not estimates?
- Do you have cash for your equity share, the up-front costs, and an overrun?
- Is the exit written down, with a backup if the first plan slips?
- If you plan to keep the property, can it later meet permanent-lender condition and lease requirements?
If you answered no to the first two, the deal is not ready. If you answered no to the last two, the loan may be the wrong tool. Forum practitioners suggest that numbers must justify the higher cost of capital, and some recommend a lower-risk first project before a full flip.
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. Reach the team at 828-256-2183 or request a quote.
Frequently Asked Questions
Is a hard money loan a mortgage?
In structure, partly. It is secured by a lien on the property and can end in foreclosure. In purpose, term and underwriting it is a different product: a short-term, interest-only business-purpose loan focused on the property and the exit.
Can I live in a property financed with hard money?
No. The network program is for non-owner-occupied residential property, 1-4 units, with ground-up construction up to 10 units. Owner-occupied homes are not offered.
Does credit matter?
Yes, though underwriting is mostly asset-based. The network generally wants a 620 minimum, with added conditions below 660. Property, plan and exit carry most of the weight.
Can I get a hard money loan with no experience?
Often yes, at the lower leverage tier. With fewer than 2 completed projects, flip leverage is 85% of project cost, capped at 75% of after-repair value. The higher tiers reward documented completed projects. All terms vary by lender, property and experience.
What happens if I cannot sell before the loan matures?
You face extension, refinance or discounted sale. Extensions vary by lender and are not guaranteed. A refinance depends on the property meeting the permanent lender’s requirements, so confirm the take-out first.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 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. CFPB, Truth in Lending Act exam procedures
2. Federal Register, Ability-to-Repay and Qualified Mortgage Standards
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Use a Hard Money Loan to Buy Out Siblings or a Partner? · Hard Money Loan ARV Requirements in a Small Town With No Comps · How a Lender Reads a Seller-Carried Note on a Hard Money Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.