The Quick Read: Hard money suits a flipper who wants a standardized, asset-based lender and a predictable process. Private money suits a flipper who has a real relationship with an individual lender willing to negotiate terms. The two labels overlap in practice, so judge the lender by how it underwrites, not by what it calls itself.
- Hard money underwrites mainly on the property, the rehab plan, and the after-repair value (ARV).
- Private money underwrites on whatever the individual lender decides, often the relationship and track record.
- A small down payment depends on the lender’s leverage tier, not on the label.
- Both are short-term bridges, so the exit plan matters as much as the entry.
- Neither label means no underwriting.
The Honest Answer First
Nobody has officially defined these terms, but the practical split is simple. Hard money comes from a lending business with standard criteria. Private money comes from an individual or small group who negotiates one deal at a time.
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.
Hard money is for the investor who wants clear rules and repeatable terms. Private money is for the investor who already has a lender who trusts them. If you have neither a track record nor a relationship, hard money is usually the more realistic door. If you have a strong relationship, private money can bend in ways a lending business cannot.
Some lenders call themselves private to sound flexible. Ask who the lender is and how the file gets decided.
Side-by-Side
The private money column reflects published industry norms. Lendmire’s wholesale network places both kinds of financing, and the hard money column below also reflects the network’s program norms. Terms vary by lender, property, and experience.
| Factor | Hard Money | Private Money |
|---|---|---|
| Who lends | Lending business or investor group | Individual or small group |
| Review basis | Property, rehab plan, ARV | Relationship, track record, credit, deal story |
| Documentation | Contract, scope of work, budget, proof of funds | Anywhere from a note and deed to very little |
| Property types | Non-owner-occupied, 1-4 units typical | Whatever lender and borrower agree |
| Entity vesting | LLC common, personal guarantee often | Negotiated |
| Rehab funding | Held back, released in draws | Negotiated |
| Reserve expectations | Proof of funds for down payment and closing | Negotiated, often informal |
| Terms | Short, interest-only, balloon at maturity | Usually five years or less, balloon common |
| Predictability | Higher | Lower, depends on the person |
What a Small Down Payment Really Means
A small down payment on a flip is about leverage tiers. Across the wholesale network, hard money flip leverage is tiered by documented completed projects. Programs typically fund 85% of project cost with fewer than two completed projects, 90% of project cost at two or more, and 93% of project cost at five or more. Every tier is capped at 75% of ARV. Up to 100% of the rehab budget funds in draws as work is completed. That is a rehab-budget figure, not a purchase loan-to-value.
There is no true 100% purchase program. The borrower still brings the gap between cost and loan, plus closing costs and carry. These figures vary by lender, property, and experience, and nothing here is a commitment to lend.
Private money has no standard tier. A private lender may agree to a very low down payment, or ask for more because the deal is thin. Terms are whatever two people sign.
When Hard Money Is the Better Fit
Hard money fits when you want the rules written down before you start.
- You have a scope and a budget. The file is built on purchase price, rehab budget, and ARV. A clean package is the whole game.
- Your experience is limited. First-time investors qualify at the lower leverage tiers, so a thin track record is workable. The top tier is reserved for experienced investors.
- You want draws. Rehab money is held back and released against completed work, which keeps the budget honest.
- You need standard vesting. An LLC borrower with a personal guarantee is common, subject to lender program eligibility.
- You have no personal lender. A lending business does not need to know you.
Across the network, credit minimums start at 620, with added conditions below 660. Underwriting stays asset-based, meaning property, plan, and exit. Loan sizes reach $5,000,000, with smaller balances varying by lender. Terms run 6 to 18 months, interest-only, with no prepayment penalty. Those are short runways, so a project that runs late needs a plan.
When Private Money Is the Better Fit
Private money fits when a person, not a process, is the strength of your file.
- You have a lender who knows you. A track record with one individual can outweigh a thin package.
- Your deal does not fit a template. Terms are negotiable, including down payment, and a private lender can sometimes sit behind a primary lender to cover a gap.
- You want a longer runway. Private terms are commonly up to five years, though a balloon usually ends them.
- You want to keep cash in reserve. Some investors use private money to spread their own capital over more deals. The trade is concentration on one relationship.
The catch is documentation discipline. Informal does not mean unregulated. A private lender still has to follow the law and be properly licensed, or use someone who is. Get a proper note and security instrument, title work, and insurance. A handshake is not a loan file.
Stacking is risky too. A primary lender may object if gap money surfaces at underwriting, because it wants to see your own capital at risk. Disclose any second layer early.
The Business-Purpose Line
Both products are meant for investment projects, not for a home you will live in. Under Regulation Z, credit extended primarily for a business purpose is exempt, and the creditor determines the primary purpose in each case. RESPA’s Regulation X has a similar business-purpose exemption.
The test is the purpose of the loan, not the property type. Compliance Alliance explains that owner-occupied rentals turn on unit count, while non-owner-occupied rentals can be exempt even at one unit. A flip you plan to live in may not qualify for business-purpose treatment. State rules vary, so make sure any lender is properly licensed.
Can You Use Both?
Yes, and many investors do. A common pattern is hard money for purchase and rehab, then a different source for the exit. Private lenders sometimes agree to refinance at the end of the term, which makes the sequence work.
Many investors also refinance out of hard money into long-term DSCR financing once the property is leased and stable. Lendmire brokers that path. On the DSCR side, most programs want a score around 660, with 700 and above unlocking the strongest leverage tiers, and coverage starts at 1.00 on select programs. Clearing 1.00 does not equal positive cash flow, since repairs, vacancy, and management sit outside the calculation. The complete DSCR loans guide covers the mechanics.
Why the Claims Contradict Each Other
Some pages say private money is cheaper, others say it costs more. Some say credit is ignored, others say it is checked. Both can be true, because private money is not a standard product. One lender may skip credit and another may weigh credit, capacity, and collateral.
Hard money is asset-based, but that is not the same as no underwriting. A borrower with no cash and poor credit will have a hard time at any lender. Treat that as a blunt practical reality, not a rule.
Key Terms Defined
After-repair value (ARV): the estimated value of the property once the rehab is finished.
Loan-to-cost: the loan amount as a share of purchase price plus rehab budget.
Draw: a release of rehab funds after a stage of work is completed.
Balloon payment: the remaining balance due in one lump at the end of the term.
Personal guarantee: a promise by the owner to repay if the entity borrower cannot.
Gap funding: extra capital that covers the difference between the loan and the total cash needed.
Red Flags With Any Lender
- A lender who will not put terms in writing.
- No licensing, or a vague answer about it.
- Pressure to skip title work or insurance.
- A promise of approval before looking at the deal.
- A label used as a substitute for an explanation of how the file is decided.
Preparing Before You Ask
1. Write the scope of work and a line-item budget.
2. Pull recent sold comps to support your ARV.
3. Document proof of funds for your down payment, closing costs, and carry.
4. Decide the exit: sale, or refinance into long-term rental financing.
5. Decide how the borrowing entity will hold title.
The Verdict
Pick hard money when you want standard rules, draws, and a lender that does not need to know you. Pick private money when a person who knows you is willing to write a deal that a template cannot. For a small down payment, the leverage tier and your own cash cushion matter more than the label. Tax treatment varies; consult a qualified professional.
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.
Frequently Asked Questions
Are hard money and private money legally different?
No. The terms are not formally defined, and the same laws apply to both. Calling a lender private does not avoid regulation.
Can I flip with almost nothing down?
Not with nothing. Across the network, the top leverage tier requires documented experience and still leaves the borrower covering the gap, closing costs, and carry. There is no true 100% purchase program.
Does hard money ignore credit?
No. Underwriting is asset-based, but the network sets a 620 minimum score, with added conditions below 660.
Can I use hard money for the purchase and private money for the gap?
Sometimes. A primary lender may object to stacked gap funding if it finds out late, so disclose the structure early.
What happens when the flip becomes a rental?
Many investors refinance into long-term DSCR financing once the property is stabilized. Eligibility and leverage depend on the lender, credit, and the property.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Hard money often opens the deal, and a refinance typically closes the chapter – see the hard money loan overview.
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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 – Regulation Z §1026.3, Exempt transactions
2. Cornell LII – 12 CFR 1024.5, RESPA/Regulation X coverage
3. Compliance Alliance – Regulation Z and Investment Properties
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 Hard Money Cover a Fix and Flip Purchase? · Can You Buy a Flip in an LLC With a Hard Money Loan? · Can You Have More Than One Fix and Flip Hard Money Loan at Once?
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.