The Quick Read: A hard money loan is built around one deal, with a lien on the flip and rehab money released in stages. A HELOC is a revolving line against a home you already own, and you control the draws. The two are built so differently that “which is cheaper” is the wrong first question. Start with what you can pledge and how you want rehab money to flow.
- Hard money is secured by the flip. A HELOC is secured by your own home, so the flip is not the collateral.
- Hard money draws are released after completed work. HELOC draws are yours to take, up to the limit.
- Hard money loans are short and interest-only. A HELOC runs a draw period, then a repayment period.
- Entity borrowers, such as LLCs, usually fit hard money more naturally than a HELOC.
- Pricing varies by lender, borrower, and file. This article compares structure only, and the calculator on the page gives an illustrative estimate.
The Honest Answer on Who Each Is For
Hard money is for the investor who needs deal-based financing and has a clear plan to finish and exit. A HELOC is for the investor who already holds meaningful equity in a home and wants flexible cash with no project gates.
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.
Neither one is a rival to the other. Many flippers use both. A HELOC can supply the cash to close, and hard money can carry the purchase and the rehab.
The risk differs too. With hard money, the flip is the lien, though a personal guarantee can still reach your other assets. With a HELOC, your own house backs the debt.
Across the wholesale network Lendmire places files with, hard money is business-purpose financing for non-owner-occupied residential property. Lendmire is a broker. It arranges financing through select lenders in its network across 41 markets, including Washington, D.C. The lenders review eligibility and make the decisions. The hard money figures below come from that network, and they vary by lender, property, and experience.
The HELOC column shows published industry norms. Terms differ by lender, and your own line’s documents control.
Side-by-Side
| Factor | Hard Money Loan | HELOC |
|---|---|---|
| Collateral | The flip property | Your existing home |
| Underwritten on | Deal, after-repair value, budget, exit | Your equity, credit, and income |
| Borrower type | Individual or entity, often with guarantee | Individual account holder |
| How draws work | Released after completed, inspected work | You draw up to the limit |
| Term structure | Short, interest-only, exit by sale or refi | Draw period, then repayment period |
| Cash you need up front | Early phases and contingency | Equity already in place |
A few notes on that table, since cells are short by design.
Property types. Hard money in the network targets non-owner-occupied residential property, one to four units. Ground-up construction goes to ten units. A HELOC attaches to your own home. The flip’s property type barely matters to the line.
Documentation. A hard money file is a deal package: the property, the scope of work, the budget, the projected finished value, and the exit plan. A HELOC file looks like a consumer file, with an appraisal of your home among the up-front costs, per the CFPB’s HELOC booklet.
Pricing. It is left out of the table on purpose. Hard money cost and HELOC cost behave differently over a hold. Model your own deal in the calculator, treat the result as an illustrative estimate, and compare real terms on the documents.
How a Hard Money Flip Loan Is Built
A hard money loan sizes off the project, not your paycheck. The lender looks at the purchase, the rehab budget, the after-repair value (ARV, meaning what the property should be worth when finished), and your exit.
Leverage runs on loan-to-cost, meaning the loan as a share of total project cost. On most files in the network, that works out as follows:
- 93% of project cost at five or more completed projects.
- 90% of project cost at two or more completed projects.
- 85% of project cost with fewer than two.
- Every tier is capped at 75% of ARV.
Picture an investor with two completed flips. The 90% tier applies. But if the finished value is thin compared to total cost, the 75% ARV cap becomes the number that actually limits the loan. Experienced borrowers hit the ARV cap more often than they expect.
Bridge purchases with no rehab run up to 80% of purchase price. Refinances run up to 65% of value. Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure, not a purchase LTV. There is no true 100% purchase program. The top tier is reserved for experienced investors.
Loan sizes go up to $5,000,000, with larger by exception. Terms run 6 to 18 months, interest-only, with no prepayment penalty on the current program. Credit starts at a 620 minimum, with added conditions below 660. First-time investors qualify at the lower leverage tiers.
Asset-based does not mean borrower-blind. Experience, cash, and guarantees all get reviewed. That is why hard money is an underwritten loan, not a handshake.
Hard money lenders routinely lend to LLCs, usually with a personal guarantee, which is a promise that you personally back the loan. Entity-titled loans are subject to lender program eligibility.
How a HELOC Is Built
A HELOC is revolving. You borrow, repay, and borrow again within a limit. The CFPB describes the mechanics plainly. The draw period, also called the borrowing period, comes first. You usually draw with special checks or a card, and some plans require a minimum draw each time or an initial draw at setup. During that window, some plans require principal plus interest, and others allow interest-only.
When the draw period ends, repayment begins, whatever you paid before. Bankrate describes draw periods that commonly run up to 10 years. That is a market figure from published sources. In the network, investment-property HELOC lines cap at $500,000 total, and there is no tier above that.
The line’s payment can also change over time even if you draw nothing more, according to the CFPB. And a limit is not always permanent. ConsumerAffairs reports that some lenders adjust limits mid-draw when property values or credit change. A line that looked open in month one may not look the same in month seven.
Two edge cases matter for flippers.
It’s a home-equity product. A HELOC secured by your primary home is built for that home. Occupancy rules apply, and the line’s terms can restrict renting the home out. Read them before you plan around it. An investment-property HELOC is a different product with its own terms.
Selling the pledged home generally means paying the line off. If you plan to sell the house that backs the line, plan the payoff.
Two Meanings of “Draw”
The word means two different things here, and mixing them up causes bad budgets.
A hard money draw is a reimbursement. Work gets completed, the lender confirms it, and funds release against that work. Rehab money is held back until each phase is done. Some lenders pay only for line items that are complete and installed. The number and size of draws are usually set up front, and the loan documents should spell them out. You pay interest only on funds actually disbursed, so the carry grows as draws release.
That means you front the early costs. Demolition and the first phase of work usually come out of your pocket. A contingency cushion matters as well. Budgets run over.
A HELOC draw is a withdrawal. You take cash when you want it, in the size you want, with no one inspecting a sheetrock job first. Nobody checks that you spent it on the flip. That freedom cuts both ways. There is no lender discipline on your budget, and no built-in pause when the project drifts.
For a rehab with real scope, the staged hard money structure can protect you as much as it constrains you. For a small cosmetic job, the HELOC’s flexibility may suit you better.
When Hard Money Is the Better Fit
Hard money fits when the deal is the best collateral you have. It also fits when you want the flip’s lien, not your home’s, behind the loan.
Consider it in these situations:
- You don’t have much home equity. The loan sizes off the project, so you can do a deal without a large equity position elsewhere.
- You flip through an entity. Loans to LLCs are common, subject to lender program eligibility and usually with a personal guarantee.
- The rehab is large. Up to 100% of the rehab budget can fund in draws against completed work, so you’re not carrying the whole scope from your own cash.
- You are scaling. Leverage steps up with completed projects, which rewards a track record.
- You want your home out of the deal. The lien sits on the flip. The caveat is that a personal guarantee can still reach other assets.
Hard money also fits the flip’s timeline. The term is fixed, and the purchase, rehab, and sale are the whole plan. No prepayment penalty on the current program means a sale or refinance doesn’t trigger a charge for paying off early.
The tradeoff is the fixed maturity. If the flip stalls, you need an extension or a refinance, and neither is something to count on. Many investors who keep a property refinance out of hard money into long-term DSCR financing once it is stabilized. DSCR, or debt service coverage ratio, compares rent to PITIA (principal, interest, taxes, insurance, and any association dues). Lendmire brokers that path.
Here is a pattern that shows up in this kind of file. Investors treat the exit as an afterthought and the rehab as the main event. Underwriters read it the other way around. A clear exit with a realistic finished value does more for the file than a long list of upgrades.
When a HELOC Is the Better Fit
A HELOC fits when you already hold substantial equity and credit capacity, and you value control over the draw schedule.
It tends to work in these cases:
- You have meaningful equity in a home you plan to keep. Borrowing is typically capped at a percentage of equity, which is the home’s value minus the mortgage owed, per the CFPB.
- The project is small or phased. You can draw a little, repay, and draw again. Revolving access suits a series of small jobs.
- You want to avoid inspection gates. No one inspects before releasing funds. For a quick cosmetic refresh, that can be a plus.
- You need cash for the front end. Many investors use a HELOC to cover the down payment on a hard money purchase. That’s a common stack, and it can make sense.
- You value a flexible exit. A revolving line doesn’t force a sale on a fixed date the way a short loan term does.
The costs are less visible. Your home is the collateral. Falling behind on a HELOC can put the home at risk, which is the CFPB’s plain warning to borrowers. The line can also change underneath you if the lender adjusts limits or the payment resets, and the repayment period brings a bigger obligation than the draw period did.
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, including under IRS Publication 936.
The shorthand that a HELOC is cheaper does a lot of unearned work. It skips the tax question, the collateral question, and the question of whether the line will still be open when you need the last draw.
Stacking Both
The most common hybrid is a HELOC on your own home funding the cash side of a hard money purchase. The hard money loan carries the property and the rehab draws. The HELOC covers the down payment and early costs.
It works, and it also doubles your exposure. If the flip stalls, you owe the hard money loan at maturity and you’re paying on the HELOC. Your home is behind one loan, and a guarantee may sit behind the other. Run the stalled case before you commit, not after.
This is a toss-up for some investors. Stacking reduces the cash you need up front, but it ties your home to the outcome of the flip. An investor with deep reserves may prefer to skip the HELOC. An investor with thin cash may find the stack is the only way the deal happens.
For the rehab-budget version, see Lendmire’s piece Rental HELOC vs Hard Money for a Rehab Budget.
Key Terms Defined
After-repair value (ARV): what the property should be worth once the rehab is finished. Hard money lenders cap leverage against it.
Loan-to-cost: the loan as a share of the total project cost, meaning purchase plus rehab. Hard money leverage is usually stated this way.
Draw: a release of loan funds. On hard money it follows completed work. On a HELOC it is your own withdrawal.
Personal guarantee: your personal promise to repay if the borrowing entity can’t. It’s common on loans to LLCs.
Equity: the home’s value minus what you still owe on it. A HELOC is sized off it.
A Balanced Verdict
If your best asset is the deal, hard money is the cleaner structure. It sizes off the project, lets an entity borrow, and releases rehab money in stages. The price of that structure is a fixed maturity and a guarantee.
If your best asset is equity in a home, a HELOC gives you flexible access with no inspection gates. The price is that your residence backs the debt, and the line can change under you.
For many flippers, the real answer is both, used for different jobs. Hard money handles the purchase and the rehab. A HELOC, if you hold one, covers the cash side. Whichever route you choose, line up the exit before you sign.
Program details are set by individual lenders, vary by borrower, property, and experience, and are not a commitment to lend.
Frequently Asked Questions
Can a HELOC on my home fund a flip?
It can, but the line is secured by your home, not the flip. Whether you may use the funds for an investment purchase depends on the line’s terms. Investors also use a HELOC for the down payment on a hard money loan. In the network, investment-property HELOC lines cap at $500,000 total. Read your own line’s documents before you plan around it.
Does hard money pay for the whole rehab up front?
No. Draws are reimbursements after the work is done, so you front the early costs. Plan cash for the first phase and a contingency.
What happens if my flip doesn’t sell before the hard money term ends?
You need an extension or a refinance, and neither is guaranteed. Terms in the network run 6 to 18 months, interest-only, varying by lender, property, and experience. Many investors who keep the property refinance into long-term rental financing once it is stabilized. Build the exit plan before the first draw.
Can my LLC borrow on a HELOC the way it can on hard money?
A HELOC is secured by a personally held home, so it is usually an individual’s account. Entity rules on HELOCs vary by lender. Hard money lenders routinely lend to LLCs, typically with a personal guarantee, and entity loans remain subject to lender program eligibility.
Do I need experience to get hard money?
Not always. First-time investors qualify at the lower leverage tiers, with 85% of project cost for fewer than two completed projects. Everything 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. For the longer-term exit, the complete DSCR loans guide explains how rental financing works after the flip. The calculator on this page gives an illustrative estimate only. Flips that clear on loan-to-cost but fail on finished value are the ones that get resized, so check your ARV before you check anything else.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 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 HELOC booklet (print version)
2. Bankrate: HELOC Draw Period
3. ConsumerAffairs: HELOC Draw Period
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: HELOC vs Hard Money for a Flip: Which Wins at Different Deal Sizes · HELOC vs Hard Money for a Flip Purchase and Rehab · DSCR vs HELOC vs Hard Money for an Equity-Rich STR Owner
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.