Hard Money Loan

A hard money loan is a short-term, asset-based loan funded by private lenders rather than banks, prioritizing speed and property value over borrower credit or income. Hard money is the fastest-closing and most expensive form of CRE financing, with rates commonly 9–15% plus 2–5 points in origination fees, typically used for fix-and-flip, auction purchases, or deals that need to close in days rather than weeks.

Hard money lending fills the niche where speed and flexibility matter more than cost — auction purchases, off-market deals with tight closing windows, distressed properties banks won't touch, or borrowers who need cash before a more conventional loan can be arranged. Because underwriting focuses primarily on the collateral (usually capped at 65–75% of as-is or after-repair value), hard money loans can close in days rather than the weeks or months required for bank or agency financing.

That speed and flexibility comes at a steep price: hard money rates are the highest in the CRE lending spectrum, and loans are almost always short-term (6–24 months), interest-only, and structured as a bridge to something cheaper. Hard money lenders are typically private individuals or small funds rather than institutions, which allows for negotiable, deal-specific terms but also means less standardization and more variation in reputation and reliability.

Borrowers should treat hard money as a true bridge — a tool to win a deal or solve a timing problem — with a clear, realistic exit plan to refinance into bridge, DSCR, or permanent debt, since carrying hard money longer than necessary erodes returns quickly given the rate and points involved.

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