The Quick Read: Yes, interest-only payments with a balloon at maturity are the standard hard money structure, not a special request: the borrower pays interest each month, the principal stays put, and the whole balance comes due at the end of the term, repaid by a sale or a refinance. Most programs in Lendmire’s wholesale network run that way, and the real work is building the exit, not asking for the structure.
- Terms on the current program run 6 to 18 months, interest-only, with no prepayment penalty. Everything varies by lender, property, and experience.
- The balloon equals the amount drawn. Rehab funds count only as they are released in draws.
- The exit is the real underwriting variable: a sale, or a refinance into long-term DSCR financing.
- A takeout lender sizes on its own appraisal, not your after-repair estimate.
- Business-purpose, non-owner-occupied property only. Not a commitment to lend.
Why Interest-Only With a Balloon Is the Default
Hard money lenders underwrite the property, the plan, and the exit. They are not underwriting a thirty-year payment history. A short note with no principal paydown fits that logic: the borrower keeps monthly carry low while the property is rehabbed or leased up, and the lender is repaid from a sale or a takeout loan.
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.
Across the network, this is the shape of the product. A DSCR loan is the opposite: long-term, amortizing, and underwritten to the property’s rent. Hard money is short, interest-only, and ends in a balloon. DSCR financing is built to hold.
So the answer to “can you structure it this way” is that you usually don’t have to ask. It arrives that way. What you can shape is the term within the program range, the draw schedule, and the exit plan behind it.
Key Terms Defined
Balloon payment: The lump sum due at maturity. On an interest-only loan it equals the original amount borrowed.
Interest-only payment: A monthly payment that covers interest on the drawn balance and nothing toward principal.
Maturity: The date the full balance is due.
Exit: The sale or refinance that repays the loan.
Loan-to-cost: The loan as a share of total project cost (purchase plus rehab), used for flips and rehab deals.
After-repair value (ARV): The projected value once work is done. It sets the cap on a flip loan but not the takeout loan.
Seasoning: The time since you took title. A new lender often uses it to decide whether to size on cost or on value.
Draw: A release of rehab funds after inspected work is complete.
How the Structure Works, Step by Step
Here is the timeline from closing to payoff.
1. Term and payment. The borrower pays monthly interest on the drawn balance for the term. Principal does not move until maturity. Programs in the network run 6 to 18 months, with no prepayment penalty.
2. Draws on rehab funds. Up to 100% of the rehab budget funds in draws against completed work. Only released principal counts toward the payoff, and interest accrues on what has been drawn, every month the project runs.
3. Points and costs at closing. Those are one-time charges, not part of the monthly payment. When a lender lets you roll costs into the loan, that raises both the balloon and the interest. Ask what is financed and what is paid in cash.
4. Documents. Expect a loan application covering your background and strategy, bank statements, and entity documents if an LLC holds title, subject to program eligibility.
5. The exit. Work backward from the maturity date. A sale repays the note directly. A refinance repays it with a new loan.
6. Payoff. The balloon is wired to the hard money lender from sale proceeds or from the new loan. No separate check from your pocket is needed if the exit works.
What Leverage Looks Like
Leverage on the current program is tiered by documented completed projects. Fix-and-flip loans fund 93% of project cost at 5 or more completed projects, 90% of project cost at 2 or more, and 85% with fewer than 2. Every tier is capped at 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. Ground-up construction reaches 90% of cost and 75% of completed value at 3 or more completed projects.
Loan amounts run up to $5,000,000, with larger loans by exception. Credit starts at a 620 minimum, with added conditions below 660. First-time investors qualify at the lower leverage tiers. All of this varies by lender, property, and experience, and nothing here is a commitment to lend.
The top tier is for experienced investors. If you are new, expect to bring more cash.
What Can You Actually Negotiate?
Less than most people hope. Here is how it sorts out.
| Item | Usually flexible | Usually fixed |
|---|---|---|
| Term within program range | Yes | |
| Interest-only payment | Yes | |
| Balloon at maturity | Yes | |
| Draw schedule and rehab budget | Yes | |
| Costs rolled into the loan | Varies by lender | |
| Prepayment penalty | None on this program |
The practical lever is term length. Pick the term that outlasts everything between purchase and refinance: rehab, punch list, lease-up, and the seasoning wait. A loan that matures before the takeout lender will lend is the classic failure.
Where the Exit Breaks
The balloon is not a surprise bill. It is the plan from day one. But a balloon with no takeout turns into pressure fast, and the failures follow a pattern.
A low appraisal. The takeout lender sizes on its own appraisal, not on your projected after-repair value. If the number lands light, cash gets trapped or you cover the gap at payoff.
Seasoning not finished. Seasoning runs from the recorded title date. Finishing the rehab or signing a lease does not start the clock. When the bridge matures before seasoning completes, the options are an extension, a payoff-only DSCR loan with no cash back, or a sale.
Rent that can’t carry the new loan. The refinance is sized by the rent. If rent covers too little of the new payment, the loan caps below your payoff.
Run the exit math before you close the bridge. The new loan is the lender’s cap times appraised value. Break-even appraisal is the hard money payoff plus exit costs, divided by that cap. Cash back is the new loan minus the payoff minus exit costs. If break-even sits above what comps support, the structure is wrong for the deal.
Planning the DSCR Exit
Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. Pick the exit program before you close the bridge loan, not after.
The DSCR test is rent divided by PITIA. Most programs in the network use the lower of the actual lease or the appraiser’s market rent. A few use the lease regardless. Coverage of 1.00 is where select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Interest-only structuring on the new loan removes principal from the payment and can lift the ratio. Typical purchase leverage lands at 75% to 80% LTV, and a cash-out refinance tops out around 75% LTV, with about 6 months of seasoning the common expectation. Most programs want around a 660 score, and 700 or higher unlocks the strongest tiers. Reserves commonly sit near 6 months of PITIA and vary by lender, leverage, and loan size.
One caution. Clearing 1.00 does not mean the property cash flows. Repairs, vacancy, management, utilities, and capex sit outside the calculation. Check the note terms too, since many DSCR notes carry prepayment penalties. Weigh that against your hold period. Our complete DSCR loans guide walks through the full program.
If the cash-out piece of your plan is the open question, Lendmire’s piece Interest-Only DSCR Loan vs Hard Money Loan for a Cash-Out compares the two.
Why Only Investors Can Use This Structure
Business-purpose loans fall outside most consumer-mortgage rules. Under Regulation Z’s business-purpose exemption, credit extended primarily for a business or commercial purpose is exempt, and the creditor determines the primary purpose. Consumer qualified mortgages, by contrast, may not carry interest-only or balloon features, per the CFPB’s ATR/QM compliance guide. That is why this structure lives in the investor world and does not apply to a home you live in.
Business purpose is not a free pass. Regulators look at the loan’s purpose, not only the property type, and factors such as transaction size and how much of the borrower’s income comes from the property can bear on that determination. Files that carry clear business-purpose documentation have fewer gaps to review.
Choosing a Structure by Strategy
| Strategy | Typical fit | Main exit |
|---|---|---|
| Fix-and-flip | Interest-only, draws, 6 to 18 months | Sale |
| Buy-rehab-hold | Interest-only, then refinance | DSCR refinance |
| Bridge purchase, no rehab | Interest-only, short term | Refinance or sale |
| Ground-up construction | Draws against completed work | Sale or refinance |
A flip lives or dies on resale timing. A hold lives or dies on the appraisal and the rent. Match the term to the slower of those two.
Loan Document Checklist
Before signing, confirm these items in the note and closing package:
- The maturity date and what counts as default.
- Any extension option and its cost.
- What is financed versus paid in cash, since it changes the balloon.
- The draw process and inspection requirements.
- Prepayment terms. On the network’s current program there is none, but confirm it on your file.
- Entity documents and the guaranty structure, since lenders commonly want a personal guaranty even when an LLC holds title.
Practitioner Note
On bridge-to-DSCR files, the most common preventable problem is a maturity date set against the rehab schedule instead of the seasoning schedule. The strongest files map three dates before closing: the end of the rehab, the end of seasoning, and the maturity. When the third sits comfortably past the other two, the exit has room to work.
Frequently Asked Questions
Can a hard money loan be interest-only?
Yes, and it usually is. Payments cover interest on the drawn balance, principal stays untouched, and the full amount comes due at maturity. Terms on the current program run 6 to 18 months, and the exact structure varies by lender, property, and experience.
Do I have to write a check for the balloon?
Not if the exit works. A sale or a refinance repays the note at maturity. The balloon is planned from day one, and the problem arises only when no takeout is lined up.
Can I make principal payments or prepay?
There is no prepayment penalty on the current program, so paying down early does not trigger a fee. Confirm the terms on your own note, since lenders differ.
Do costs get added to the balloon?
Costs can be added to the balloon. When a lender rolls costs into the loan, the balance and the interest both rise. Fees paid at closing in cash stay out of the balloon.
What if I can’t refinance in time?
The options are an extension, a payoff-only DSCR loan with no cash back, or a sale. Start the takeout work early, and confirm seasoning and appraisal expectations before the maturity date gets close.
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.
Tax treatment varies; consult a qualified professional.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. 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 Regulation Z, §1026.3 exemptions
2. CFPB ATR/QM small entity compliance guide
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 a DSCR Refinance Close Before Hard Money Maturity on a Long Rehab? · Can You Use a Hard Money Loan to Buy Out Siblings or a Partner? · Hard Money Overrun Documentation for a BRRRR Rehab Into a DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.