Guide to Fix-N-Flip & Hard Money Loans
A hard money loan is a short-term, high-interest loan secured by real estate. Instead of relying on a borrower’s credit score or income, hard money lenders focus on the property’s value as collateral. These loans are commonly used by real estate investors who need fast funding to purchase, renovate, and resell properties.
How a Hard Money Loan Works
Hard money loans work by using real estate as collateral rather than relying on a borrower’s creditworthiness. Lenders assess the property’s current value and after-repair value (ARV) to determine the loan amount. Typically, they lend 65%–75% of the property’s value and may finance 100% of renovation costs.
These loans are structured as short-term, interest-only loans, meaning borrowers make monthly interest payments and pay the principal in a lump sum at the end of the loan term, (this is called a balloon payment) usually 6–18 months. Since these loans close quickly—often in 10 days or less—they are ideal for real estate investors who need fast funding for flips or competitive purchases.
Highlights
Fast approvals and funding – Often within 10 days or less.
Higher interest rates than traditional mortgages.
Short-term financing – Typically 6–18 months.
Easier approval process – Based on property value, not credit score.
Hard Money Loans vs. Traditional Mortgages
Feature | Hard Money Loan | Traditional Mortgage |
Approval Time | 1–2 weeks | 30–50 days |
Credit Score Requirement | Low/None | Strict requirements |
Interest Rates | 9%–18% | 6%–8% |
Loan Term | 6–18 months | 15–30 years |
Down Payment | 20%–30%+ | 3%–20% |
Pros and Cons of Hard Money Loans
Pros of Hard Money Loans
✅ Fast funding – Ideal for competitive markets. ✅ Less strict approval – Credit history matters less.
✅ Flexible underwriting – Focused on the property and less on the borrower
✅ Great for fix and flip investors – Helps fund renovations quickly.
Cons of Hard Money Loans
❌ Higher interest rates – Typically 9%–18%.
❌ Short repayment terms – Usually 6–18 months.
❌ Some have large down payments – Often 20%–30%+.
❌ Potential prepayment penalties.
Who is a Hard Money Loan Best For?
Property Flippers
Investors who buy, renovate, and resell properties quickly benefit from hard money loans because of their fast funding and flexible terms.
How to Get a Hard Money Loan
1. Find a Reputable Hard Money Lender (A broker can do this for you)
Look for lenders with competitive rates, fast closing times, and good reviews.
2. Meet Certain Requirements
Most hard money lenders require a solid investment plan, property as collateral, and a down payment (20%–30%).
3. Gather Documentation
Basic financial documents, property details, and rehab plans are usually needed.
4. Compare Lenders and Apply
Compare rates, fees, and loan terms before choosing a lender.
What Are the Typical Terms of a Hard Money Loan?
Loan Term: 6–18 months.
LTV: 65%–75% of property value.
Interest Rates: 9%–18%.
FAQ About Hard Money Loans
What are hard money loan rates?
Rates range between 9% and 18%, depending on the lender and borrower experience.
Are hard money loans risky?
Yes, they come with higher interest rates and shorter repayment terms but can be beneficial when used correctly.
How long are hard money loans?
Most hard money loans last 6–18 months.
Who offers hard money loans?
Hard money loans are provided by private lenders and investment companies rather than banks.
Are hard money loans bad?
Not necessarily. They are a great tool for experienced investors but may not be suitable for long-term financing.
The Bottom Line
Hard money loans provide fast and flexible financing for real estate investors. They are an excellent tool for fix and flip investors but come with higher costs and shorter terms. If you need a loan for your next investment, consider Unlocked Capital for expert guidance to help you find the right loan for your deal.
📞 Contact Unlocked Capital today to discuss your next deal!
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